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0 pointsdguo8y ago0 comments

The Benjamin Graham (who taught Warren Buffett) distinction between investment and speculation is: "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

See http://buffettpedia.com/2015/07/investment-versus-speculatio...

Personally, I think it's helpful to think of it as a spectrum rather than as a necessarily binary distinction. Graham's definition is nice and succinct, but the problem comes with the word "promises". The safety of principal for anything cannot be guaranteed beyond all doubt.

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rowyourboat8y ago· 1 in thread

"Promise" is not meant in the strict logical sense. "Promise" can also mean "to give cause to strongly expect", as in "the upcoming thunderstorm promises hail damage".

In this case, it probably means "the investor is reasonably sure of". No, it is not an exact definition, but we are dealing with human behaviour and value judgments here, not mathematical proofs.

dguoOP8y ago

Yep, I agree. That's why I like to think of it as a spectrum. Based on analysis, someone can believe one operation is more of an investment than another operation.

I know I was being pedantic, but I wanted to avoid making it seem simpler than I think it really is.

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