Forum Archive Index - April 2001

["Brian Brakenridge" <brianbrak@xtra.co.nz>]

It comes down to the question of investing Vs speculating.

 

I'm in no way saying one is better than the other. What I do say however is that some folk are better suited to investing and some speculating. I haven't seen the context of the comments re. Yahoo being a good stock and it may not be a good analogy because I haven't done any in-depth homework on the company, but I would ask Chris Steptoe if he is judging Yahoo as a bad stock or a bad business. This I believe is the critical difference between the two money management strategies.

 

As an aside Yahoo's FY result included an 88% lift in revenue and 48% lift in net profit. They have US$1.7b in cash reserves.

 

A fundamentalist would initially ignore the "stock" price and concentrate on the fundamental strength of the business; it's management, financial strength, earning capabilities etc. If he ascertains that the fundamentals are strong then he might look at the price he has to pay for that business and ask himself if the business is fairly priced.

 

My opinion is that the fundamental investment approach is better suited to the regular "mum and dad" long term investor and the speculator approach is suited for someone who is wanting to take a bit of a punt based on the short term view as dictated by the market. One is not better than the other. Warren Buffett and George Soros have proven this point.

 

This post is in no way designed to enflame the debate because it is a debate that will never be resolved. What is important is for the individual to decide which approach best suits their individual risk profile.