Yes, what about speculation? Well, many people speculate. I hear it on the radio everyday. They have interviews with all kinds of “specialists” who speculate about oil prices, stock movement, interest rates, inflation and what have you. And most of these “guru’s” believe themselves to be right. In fact, in many cases their companies invest clients’ money based on these speculations. I am going to write about this again. For the moment, don’t be influenced by this speculation too much.
But why is it called speculation? Because people are taking a view on the future, which is always uncertain. If they are right, it is good, if not, then …?
In the same way often speculate financially. We take a view on the future and buy into something that we always call an “investment”. Vacant land is not an investment, it is speculation. Yes, I know, you can make lots of money, but it is still speculation! Remember: an investment increases in value because there is an increasing revenue stream. In other words, because the income increases, people are prepared to pay more for it. With speculation, there is no income stream, so the only reason why it can increase in price, is because there is an increasing demand. This demand is either because of genuine scarcity, such as beachfront plots, or because the demand is driven by clever marketing. When you speculate (gamble), you buy something with the hope to sell it sooner rather than later at a much better price and make your money by taking a profit.
This is really exciting stuff and many people like to boast about the money they have made in a short period of time. And I am the last person to tell you should not do it. But there are certain rules:
Firstly, acknowledge it for what it is. Call it speculation and don’t get confused with investing. Speculation normally has a short time frame. It is in and out, hopefully before you pay a cent.
Secondly, don’t use rent money or the children’s university money to speculate. There is an old proverb in the marketplace: A long-term investment is a short-term investment that went wrong. I know of many people who are paying a very big price for speculations gone wrong. As a general rule, never speculate with more than 10% of your capital and be sure that you can afford to LOSE it. In other words, do proper risk management.
Thirdly, speculation comes third in the line of saving and investing. Once you are financially free, you can speculate as much as you like without putting your life at risk.
There are endless opportunities in this world, but not every one is the right one for you. Be selective and choose the opportunities that fit your circumstances and your risk profile. And calculate the risk carefully.
They say there are 3 kinds of people in the world – those that can count and those who can’t! I think there are two kinds of people in the world – those who do and those that don’t!
The kind who “don’t” always find an excuse why something will not work, or why it is a scam. Or they always have a better alternative. That is the kind who sees an advert for a free property seminar in the paper (we offer free seminars), and without investigating decides that it is a scam, an advertising ploy, does not work, or it is useless because it is free.
This group is the group that attends a seminar, but when they take their seats they openly say: “I am only here to proof that it does not work”. At one seminar a guy sat down and said: “I do not believe that you can have more than one bond.” That was his litany for the evening! And his parting words! And I said to myself: “Sir, fortunately, what YOU belief only affects YOU and YOUR loved ones.” What you believe only affects YOUR wealth, not mine!
This is the group who always say: “I should have …” and they use “If” a lot, as in “if I knew what property prices would do, I would have …” and “If I can now buy this wonderful property …” The problem is, they don’t know where this wonderful property is. And the biggest problem? Nobody can “should”.
Needless to say, they never do and invariably when they do get the guts to act, they rush in where angels fear to tread! If we apply this to worldwide retirement statistics, that is about 94% of the population!
The other kind of people DO! They don’t talk about it other than to gather information, knowledge and wisdom. They get the info they need and go out and do it. Rarely do they discuss with other people what they did. Rarely would you see from the outside what they do. I call them Nike people – they Just do It!
Let me illustrate the difference with a story: I tell you that you will find a R20 000 000 at a specific office in at an address 1500 km from you. But you have to be there at EXACTLY 12 hours from now.
The don’ts will say things like “it is not enough time to get there”. Or “I don’t have the money to get there”. Or “what if I get there and I am late?” “What if he is lying?” “What if I get there and it is only R19 999 999?” They will find an excuse not to go. And that excuse will always take all blame and responsibility away from them.
The DOERS will quickly evaluate: can I trust this guy? If I do what he says, and he lies, what have I lost? If I don’t do it, and it is true, what have I lost? And he would be on his way. Unfortunately that is apparently only about 6% of the population.
The other 94% either thinks of ways to get at the money of the DOERS or enviously dreams about having that much money. After all, it is easier to try and win R20 000 000 on the Lotto!