You Can’t Invest Without Trading. You Can Trade Without Investing.
Understanding the difference between speculation and investing is essential to avoiding reckless risk.
✒ Benjamin Graham wrote in “The Intelligent Investor”:
“Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook.”
However, he warned that it creates three dangers:
“(1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.”
It is important to differentiate a trader (or even a speculator) from an investor.