Grail Investing

“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.”
– Bernard Baruch

In reading Bernard Baruch’s quote from many decades ago I got to thinking: When did “speculator” become a pejorative word? In the old days market participants often referred to themselves as speculators. But now it’s “traders.” And a speculator is somehow akin to a gambler.

In fact, InvestorWords.com defines speculation as “Taking large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains.”

“Trying to predict the future.” Taking large risks.” “Gambling.” I somehow don’t think the great “speculators” of the past looked at themselves that way. I think they thought they were prudent business men intelligently engaged in a perfectly legitimate enterprise. And I don’t think they would have become as successful as they were if they were merely gambling.

And if I felt like getting into it — which I don’t right now — what’s the difference between a trader and an investor? Everybody seems to think they know the difference. But if you Google it you’ll find there are different opinions about what defines investing and trading. I don’t see any point in making a distinction, but I seem to be in the minority.

Anyway, all of that is neither here nor there. I just think it’s interesting how the meaning of words change over time and how the same words mean different things to different people.

On to our strategies.

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