How Chasing Trends Can Leave You Broke! (Speculation vs. Investing)

September 11, 2023

There’s a big difference between speculating and investing. Speculating: A short-term strategy that involves buying and selling assets quickly in the hopes of making a quick profit, similar to gambling. Investing: A long-term strategy that involves holding assets for years, if not decades. High probability of success.

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We’re going to focus on the “get rich quick” schemes first. This is a no-go land. Then we’re going to kind of go through the gray zones, and then we’re going to get into some areas that I think are good ways, but we still might be cutting the corner off of how much time it takes. Yeah, let’s start with the “don’ts.” These are the things that we would not encourage you to do, that maybe other influencers out there would suggest that you should do.

The first one, we just call this “chasing the trend.” This is the idea around speculating and figuring something out before someone else does it, or maybe even just gambling and getting lucky that your idea happens to be the next big thing. This is leaning into “I’d rather be lucky than to be good,” and there are a lot of people whose strategies depend on straight-up gambling and counting on Lady Luck to make it happen.

So, let’s think about some definitions. When we think about this, what is speculating? Well, speculating, by definition, is a short-term strategy that involves buying and selling assets quickly in the hopes of making a quick profit. It’s focused on very high-risk potential returns. What do we think of that in the context compared to investing? Investing is a long-term strategy that involves holding assets for years, if not decades, and it’s focused on lower-risk probable returns, not possible returns. So, you have to think about when it comes to building my wealth, do I want the high risk, maybe it hits, or might there be a better way?

Yeah, I think here’s the thing: speculating, just like gambling, you have to know what you put into that likely ain’t coming back, so that’s not your eating money. And it’s the same with investing. That’s the part when I invest in something, I’m kind of counting on not only getting the money I put into it, but I’m also planning on getting my return, so there’s a high probability that this will happen. But Bo, I have noticed a trend; it seems like whenever things are going well, we come through a bull market, we start getting this overconfidence. What’s going on there?

A lot of people, I think, are incorrectly assured that we know how to make wise decisions. It’s really easy to say, “Oh, yeah, I was gonna start buying Bitcoin; I saw this coming,” or, “Oh, I was gonna jump on those NFTs; I knew that was going to be the thing.” Well, hindsight is always 20/20, but sometimes that 20/20 hindsight causes us to have overconfidence that we actually are going to see what’s going to take place in the future. Unfortunately, I think a lot of people, when they start betting big on that, they end up holding an empty bag.

Yeah, and this is—I mean, we could have done Beanie Babies. We didn’t, but I know right now, I see all over the internet, they’re talking about how you make money with artificial intelligence. You threw out NFTs, which was something that was a blaze a year and a half ago. Cryptos continue to be hot and cold depending upon which month we’re in. So, we want to kind of, before you jump on the next latest and greatest trend, there are probably some things you should consider.

The very first thing is do your own research. Make sure that before you invest in something or before you speculate into something, you are actually operating on sound guidance. You are operating on sound research; you’ve put thought into this. Don’t just scroll through TikTok, hear some bozo tell you how to go make a million dollars, and all of a sudden, you try to start doing that thing.

And I know we have other points to cover, but it is important always to follow the money. I think that’s so interesting, like crypto; a lot of the influencers who are out there pushing it, they’ve now been sued, they’ve been disgraced because a lot of them were on the take and not acting in your best interest. So, be very careful. It’s back to “do your own research.”

The other thing you have to do is make sure that it fits into your plan. If you are speculating or if you’re going to do something a little bit higher risk, where does this fit in your overall financial plan? And if you don’t have a plan at all, I would argue that you are not at the stage of your journey where speculation should be part of what you’re doing.

Speculation is, as I’ve already alluded to, your fun money. This is something that you’re using for recreational purposes; it’s not the retirement money; it’s not the foundation. I make the point often that, you know, there’s nothing wrong. Just like when you go fishing, you fish with a rod and reel, and it’s fun to have the fishing stories about the big ones that you caught or the big ones that got away. But if you’re fishing like your life depends upon it, you’re doing it like a commercial fisherman; you’re throwing nets out in the water so you can catch lots of fish, not just speculating that maybe that one big one’s gonna hit. For more information, check out our free resources.



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