Comments on: Are We Investing or Speculating in Growth Stocks? http://outofyourrut.com/investing-or-speculating-in-growth-stocks/ Making more money...Saving more money Mon, 21 May 2012 08:18:27 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Kevin M http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-11976 Kevin M Mon, 12 Jul 2010 12:53:30 +0000 http://outofyourrut.com/blog/?p=1079#comment-11976 Rob - I agree with what you say across the board. In regard to buying stocks as an income stream, that's the "old fashioned" way, and the method still employed by most millionaires. You won't see them loading up their portfolios with "growth stocks". The middle class for the most part does just the opposite and put themselves purely at the mercy of stock cycles. I think growth stocks can be good buys if they're out of favor, such as when their market value falls below certain measures, like net asset value or metrics based on revenue, or when an entire industry tanks in concert with the troubles of one competitor. But to put 80-100% of your portfolio into growth stocks is bald-faced speculation, and unfortunately, that's also what a lot of people do. Rob – I agree with what you say across the board. In regard to buying stocks as an income stream, that’s the “old fashioned” way, and the method still employed by most millionaires. You won’t see them loading up their portfolios with “growth stocks”. The middle class for the most part does just the opposite and put themselves purely at the mercy of stock cycles.

I think growth stocks can be good buys if they’re out of favor, such as when their market value falls below certain measures, like net asset value or metrics based on revenue, or when an entire industry tanks in concert with the troubles of one competitor. But to put 80-100% of your portfolio into growth stocks is bald-faced speculation, and unfortunately, that’s also what a lot of people do.

]]> By: Rob Bennett http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-11967 Rob Bennett Mon, 12 Jul 2010 09:06:09 +0000 http://outofyourrut.com/blog/?p=1079#comment-11967 I think that the confusion stems from the fact that stocks represent two entirely different things. Stock prices are in part comprised of the income streams from the underlying businsses. That's real. Buying that is investing. And stock prices are in part comprised of the Funny Money that is created when emotional investors bid prices up beyond fair value. That's cotton-candy nothingness that will be blown away in time. There is no one good answer to the question "Is buying stocks investing or speculating?" because it can be either or both depending on the time at which you buy stocks. It's the valuation level that applies at a given time that answers the question for you. Apple is a growth stock. But you cannot say categorically that investing in Apple is gambling. What if the price goes low enough that the stock is priced below fair value? Then you're <i>investing</i> in something with great growth potential. It doesn't get much better than that. But of course there are other times (more frequent) when the price of Apple is so high that putting money into it is pure speculation. It just depends. Rob .-= Rob Bennett´s last blog ..<a href="http://arichlife.passionsaving.com/2010/07/09/daily-caller-article-3-the-economic-crisis-is-trying-to-tell-us-something-and-were-not-listening/" rel="nofollow">Daily Caller Article 3 — The Economic Crisis Is Trying to Tell Us Something and We’re Not Listening</a> =-. I think that the confusion stems from the fact that stocks represent two entirely different things. Stock prices are in part comprised of the income streams from the underlying businsses. That’s real. Buying that is investing. And stock prices are in part comprised of the Funny Money that is created when emotional investors bid prices up beyond fair value. That’s cotton-candy nothingness that will be blown away in time.

There is no one good answer to the question “Is buying stocks investing or speculating?” because it can be either or both depending on the time at which you buy stocks. It’s the valuation level that applies at a given time that answers the question for you.

Apple is a growth stock. But you cannot say categorically that investing in Apple is gambling. What if the price goes low enough that the stock is priced below fair value? Then you’re investing in something with great growth potential. It doesn’t get much better than that. But of course there are other times (more frequent) when the price of Apple is so high that putting money into it is pure speculation. It just depends.

Rob
.-= Rob Bennett´s last blog ..Daily Caller Article 3 — The Economic Crisis Is Trying to Tell Us Something and We’re Not Listening =-.

]]> By: Aury (Thunderdrake) http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-8531 Aury (Thunderdrake) Fri, 14 May 2010 06:11:25 +0000 http://outofyourrut.com/blog/?p=1079#comment-8531 Speculating is akin to gambling. But investing is instead, more akin to a deliberate, long term goal through the years. The former is usually done out of an indy ploy, or an estimate. The latter is done with more deliberate strategies. Perhaps that could clear up that grey area. Which does seem grey at first sight, no? As an 'investor' (Or as we dragons like to call it, hoarding) I don't like to speculate. Whether I park my money in commodities, stocks, or bonds, I have two mindstates to abide by. 1) To hold onto it as long as possible (Do I see myself holding it for the next 10 years?) And 2) Have an exit plan, or a hedge. As for growth stocks.. I prefer my growth in dividends rather than. Since you can estimate mathematically, what it would grow to. But when it comes to common, capital-only stocks, it's definitely gambling. However, with the advent of options, a real sophisticated speculator won't pray the market goes up. And they can even turn a non-performing common stock into cash flow. It's very complex, but options even offer defensive strategies as much as speculation. Personally, I would stick to my dividends though. For I'm no speculator. I would advise to speculate a tiny portfolio percentage for that home run, but I could never, ever give up that investment foundation. <3 .-= Aury (Thunderdrake)´s last blog ..<a href="http://feedproxy.google.com/~r/thunderdrake/Aury/~3/fM18drMjSso/" rel="nofollow">Hoarding Dragon Basics – Investing in Precious Metals</a> =-. Speculating is akin to gambling. But investing is instead, more akin to a deliberate, long term goal through the years. The former is usually done out of an indy ploy, or an estimate. The latter is done with more deliberate strategies. Perhaps that could clear up that grey area. Which does seem grey at first sight, no?

As an ‘investor’ (Or as we dragons like to call it, hoarding) I don’t like to speculate. Whether I park my money in commodities, stocks, or bonds, I have two mindstates to abide by. 1) To hold onto it as long as possible (Do I see myself holding it for the next 10 years?) And 2) Have an exit plan, or a hedge.

As for growth stocks.. I prefer my growth in dividends rather than. Since you can estimate mathematically, what it would grow to. But when it comes to common, capital-only stocks, it’s definitely gambling. However, with the advent of options, a real sophisticated speculator won’t pray the market goes up. And they can even turn a non-performing common stock into cash flow. It’s very complex, but options even offer defensive strategies as much as speculation.

Personally, I would stick to my dividends though. For I’m no speculator. I would advise to speculate a tiny portfolio percentage for that home run, but I could never, ever give up that investment foundation. <3
.-= Aury (Thunderdrake)´s last blog ..Hoarding Dragon Basics – Investing in Precious Metals =-.

]]> By: Law of Attraction Life Coach Gives Insights on Allowing Anything You Truly Desire | The Relationship Tip http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-5456 Law of Attraction Life Coach Gives Insights on Allowing Anything You Truly Desire | The Relationship Tip Fri, 05 Mar 2010 22:38:28 +0000 http://outofyourrut.com/blog/?p=1079#comment-5456 [...] Are We Investing or Speculating in Growth Stocks? « OutOfYourRut.com [...] [...] Are We Investing or Speculating in Growth Stocks? « OutOfYourRut.com [...]

]]> By: Kevin M http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-5008 Kevin M Mon, 22 Feb 2010 13:41:25 +0000 http://outofyourrut.com/blog/?p=1079#comment-5008 Steven and Debra - I appologize for the posting issues. I have an anti-spam widget that often quarantines legitimate comments. As much as that's inconvenient, I prefer it to not having anti spam. You can't believe the crap that gets posted and the amount of it. I saw the two comments, and took the more detailed of the two. They were both good BTW. Steven and Debra – I appologize for the posting issues. I have an anti-spam widget that often quarantines legitimate comments. As much as that’s inconvenient, I prefer it to not having anti spam. You can’t believe the crap that gets posted and the amount of it.

I saw the two comments, and took the more detailed of the two. They were both good BTW.

]]> By: Steven and Debra http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-4988 Steven and Debra Mon, 22 Feb 2010 04:40:46 +0000 http://outofyourrut.com/blog/?p=1079#comment-4988 Sorry for the double post. The first one didn't seem to take so we attempted to replicate it. You can delete whichever one you wish without hurting our feelings. .-= Steven and Debra´s last blog ..<a href="http://feedproxy.google.com/~r/TheEndTimesHoax/~3/Knw-NObLbmI/are-you-hoarder-are-you-sure-part-iv-of_09.html" rel="nofollow">Are YOU a Hoarder? Are You Sure? (Part IV of a Four Part Series)</a> =-. Sorry for the double post. The first one didn’t seem to take so we attempted to replicate it. You can delete whichever one you wish without hurting our feelings.
.-= Steven and Debra´s last blog ..Are YOU a Hoarder? Are You Sure? (Part IV of a Four Part Series) =-.

]]> By: Kevin M http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-4975 Kevin M Mon, 22 Feb 2010 01:46:46 +0000 http://outofyourrut.com/blog/?p=1079#comment-4975 Steven and Debra, I think you're on to something with that, and much deeper than you know. The moral level of the culture is also a barometer of the level of trust we should presume to exist. If trust is weak due to the moral downswing, predictability becomes suspect. The waters may be too turbulent to warrant wading in. Steven and Debra, I think you’re on to something with that, and much deeper than you know. The moral level of the culture is also a barometer of the level of trust we should presume to exist. If trust is weak due to the moral downswing, predictability becomes suspect. The waters may be too turbulent to warrant wading in.

]]> By: Steven and Debra http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-4969 Steven and Debra Mon, 22 Feb 2010 00:05:32 +0000 http://outofyourrut.com/blog/?p=1079#comment-4969 Great discussion! Something we like to consider when investing is the overall level of society's values (fundamentals). If those values are on the decline, we prefer to avoid "paper promises" of any kind, to include stocks, and lean more toward tangibles...those appreciating assets you can see, feel, and taste. If society's core values are on the upswing, however, we would be inclined to reallocate our investments toward stocks and paper promises. Many of the more famous business scandals and financial catastrophes have taken place at a time when the "good times" were rolling and no one was minding the store. In this particular day and age of Enron style accounting practices, return OF principal is probably a more important consideration than return ON principal. When we see a fundamental shift in the other direction we will begin reallocating in that direction. .-= Steven and Debra´s last blog ..<a href="http://feedproxy.google.com/~r/TheEndTimesHoax/~3/Knw-NObLbmI/are-you-hoarder-are-you-sure-part-iv-of_09.html" rel="nofollow">Are YOU a Hoarder? Are You Sure? (Part IV of a Four Part Series)</a> =-. Great discussion! Something we like to consider when investing is the overall level of society’s values (fundamentals). If those values are on the decline, we prefer to avoid “paper promises” of any kind, to include stocks, and lean more toward tangibles…those appreciating assets you can see, feel, and taste. If society’s core values are on the upswing, however, we would be inclined to reallocate our investments toward stocks and paper promises. Many of the more famous business scandals and financial catastrophes have taken place at a time when the “good times” were rolling and no one was minding the store. In this particular day and age of Enron style accounting practices, return OF principal is probably a more important consideration than return ON principal. When we see a fundamental shift in the other direction we will begin reallocating in that direction.
.-= Steven and Debra´s last blog ..Are YOU a Hoarder? Are You Sure? (Part IV of a Four Part Series) =-.

]]> By: Kevin M http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-4940 Kevin M Sun, 21 Feb 2010 01:45:58 +0000 http://outofyourrut.com/blog/?p=1079#comment-4940 Monevator - that's consistent with what Paul Williams said above, and I agree on that point. However when the majority of a person's money is sitting in non-income producing assets, I think they're mostly speculating despite the economic actions of the companies behind the stocks. I believe everyone should have a minority position in growth stocks, even retirees, as a way to protect against inflation. But I'm not at all sure most people understand the risk they're taking on when the majority of their money is committed in that category. In recent years, that's been the case with many people. Monevator – that’s consistent with what Paul Williams said above, and I agree on that point. However when the majority of a person’s money is sitting in non-income producing assets, I think they’re mostly speculating despite the economic actions of the companies behind the stocks.

I believe everyone should have a minority position in growth stocks, even retirees, as a way to protect against inflation. But I’m not at all sure most people understand the risk they’re taking on when the majority of their money is committed in that category. In recent years, that’s been the case with many people.

]]> By: Monevator http://outofyourrut.com/investing-or-speculating-in-growth-stocks/#comment-4933 Monevator Sat, 20 Feb 2010 22:14:16 +0000 http://outofyourrut.com/blog/?p=1079#comment-4933 Well, it's important to remember that a stock is a stake in a company. A good company is generating profits and has cashflow, irrespective of whether it pays some of that cashflow out as a dividend. If it uses its profits to buy more factories / offices / oil fields / whatever, then the value of the company and hence the shares *is* increasing. In contrast, if you buy a barrel of oil it produces no oil, internally or externally. It's just a barrel of oil! :) Well, it’s important to remember that a stock is a stake in a company. A good company is generating profits and has cashflow, irrespective of whether it pays some of that cashflow out as a dividend. If it uses its profits to buy more factories / offices / oil fields / whatever, then the value of the company and hence the shares *is* increasing.

In contrast, if you buy a barrel of oil it produces no oil, internally or externally. It’s just a barrel of oil! :)

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