Should I Invest or Speculate?

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Edward Jones - Chad Choate, AAMS

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Posted on

Aug 31, 2023

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Florida - Sarasota, Bradenton & Charlotte Counties

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You’ll find some big differences between traditional and speculative investments — and knowing these differences can matter a great deal when you’re trying to reach your financial goals.


To begin with, let’s look at the basic types of traditional and speculative investments. Traditional investments are those with which you’re probably already familiar: stocks, bonds, mutual funds, government securities, certificates of deposit (CDs) and so on. Speculative investments include cryptocurrencies, foreign currencies and precious metals such as gold, silver and copper.


Now, consider these three components of investing and how they differ between traditional and speculative investments:


The first issue to consider is risk. When you own stocks or stock-based mutual funds, the value of your investments will fluctuate. And bond prices will also move up and down, largely in response to changing interest rates. However, owning an array of stocks — small-company, 
large-company, international, etc. — can help reduce the impact of volatility on your stock portfolio. And owning a mix of short- and long-term bonds can help you defend yourself somewhat against interest-rate movements. When interest rates fall, you’ll still have your longer-term bonds, which generally — but not always – pay higher rates than short-term ones. And when interest rates rise, you can redeem your maturing short-term bonds at potentially higher rates.


With speculative investments, though, price movements can be extreme as well as rapid. During their short history, cryptocurrencies in particular have shown astonishingly fast moves up and down, resulting in huge gains followed by equally huge, or bigger, losses. The risk factor for crypto is exacerbated by its being largely unregulated, unlike with stocks and bonds, whose transactions are overseen by well-established regulatory agencies. There just isn’t much that investors can do to modulate the risk presented by crypto and some other speculative investments.


A second key difference between traditional and speculative investments is the time horizon involved. When you invest in stocks and other traditional investments, you ideally should be in it for the long term — it’s not a “get rich quick” strategy. But those who purchase speculative investments 
want, and expect, quick and sizable returns, despite the considerable risk involved. A
 third difference between the two types of investments is the activity required by investors. When you’re a long-term investor in traditional investments, you may not have to do all that much, once you’ve built a 

portfolio that’s appropriate for your risk tolerance, goals and time horizon.

After that point, it’s mostly just a matter of monitoring your portfolio and making occasional moves — you’re not constantly buying and selling, or at least you shouldn’t be. But when you speculate in crypto or other instruments, you are constantly watching prices move — and then making your own moves in response. It’s an activity that requires considerable attention and effort.



One final thought: Not all speculative instruments are necessarily bad investments. Precious metals, for instance, are found in some traditional mutual funds, sometimes in the form of shares of mining companies. And even crypto may become more of a stable vehicle once additional regulation comes into play. But if you’re investing for long-term goals, such as a comfortable retirement — rather than speculating for thrills and quick gains, which may disappear just as quickly — you may want to give careful thought to the types of investments you pursue.


Chad Choate III, AAMS

828 3rd Avenue West

Bradenton, FL  34205

941-462-2445

chad.chaote@edwardjones.com

 

TThis article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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Edward Jones - Chad Choate, AAMS

Financial Advisor 828 3rd Ave. W., Bradenton, Florida, 34205

Experience and Background I am a financial advisor in Bradenton, FL, and began my career with Edward Jones in 2017. As a financial advisor, I want to find out what's important to you and help you build personalized strategies to achieve your goals. As a lifelong Manatee County resident, I graduated from the University of South Florida and was a teacher in Manatee County before joining Edward Jones. My driving force is to change people's lives in a positive way, and what better place than my home to do that. Whether you're planning for retirement, saving for college for children or grandchildren or just trying to protect the financial future of the ones you care for the most, we can work together to develop specific strategies to help you achieve your goals. We will also monitor your progress to help make sure you stay on track or determine if any adjustments need to be made. Throughout it all, we're dedicated to providing you with top-notch client service. But we're not alone. Thousands of people and advanced technology support from our office can help ensure you receive the most current and comprehensive guidance. In addition, we welcome the opportunity to work with your attorney, accountant and other trusted professionals to deliver a comprehensive strategy that leverages everyone's expertise. Working together, we can help you develop a complete, tailored strategy to help you achieve your financial goals. I currently volunteer with the Manatee Hurricane football Broadcast and Booster Club, serve on my church's trustees council and have previously served as a leader in Young Life. I am a member of the Manatee Chamber of Commerce and an alumnus of their Leadership Manatee program. I have been married to my childhood sweetheart, Ashley, for 15 years and we have a son, Wesley, and daughter, Camryn. We enjoy watching our children play their sports and traveling as a family.