It’s important to remember the difference between speculating and investing.
Speculating is trying to guess what’s going to happen over the short term. Things like:
• Is the GameStop short squeeze gonna continue?!
• Are these rising rates gonna cause the market to fall?!
• Which stock is the best to buy right now?!
• Will someone pay me more for this bitcoin in the future?!
Speculating is chaotic, and risky. (GameStop and Dogecoin are down 73% and 87% since the peak of the hype). And speculation is inherently a zero sum game relative to the growth of the market. For every winner, there’s a loser on the other side of the trade. The sum total of all the winnings adds to ZERO. It’s gambling.
Meanwhile, investing is slow and calm. It’s a game of decades, not days. It’s buying and holding assets that pay dividends and are likely to go up in value over long periods of time. The two best examples: Index funds and investment real estate. The longer you hold them, the more dividends you collect, and the more they’re likely to appreciate in value. Short term swings of the market and macroeconomic forces are of no concern to the investor. Time is the investors friend. The short term volatility will pass and the dividends and growth will always win out.
Don’t be a speculator. Be an investor.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.