Investing vs. Speculation - The “Spectrum Mindset”
The past couple of days have revolved around illustrating examples along the investment-speculation spectrum. On Friday, we experienced day, night and the sunset in between. Yesterday, we drew upon a traffic analogy: tailgating. Traffic provides us with a plethora of examples that resonate deeply with us because, let’s face it, when we drive, safety is paramount. Similarly, investing used to prioritize safety, a notion that has largely been forgotten, almost appearing novel these days. Hence, we will continue our series with another traffic-related example.
Consider this: Why do speed limits exist in the first place?
Speed limits are in place because ensuring collective safety is in the best interest of society. If you drive comfortably below the speed limit, the risk remains low – or at least, that’s what I, the author of this piece, believed while taking a driver’s test in California. Having engaged in some unsafe tailgating in a previous life, I realized that I needed to exercise more caution during my test. My thinking was that if I stayed significantly below the speed limit, I believed I would be deemed a safe driver by my instructor and pass the test.
However, I was mistaken. I failed that test. My instructor informed me that he actually stopped counting my mistakes because I was driving too slowly, which posed a different traffic hazard. I am still a bit puzzled as to how I endangered others by going 25 mph in a 35 zone, but c’est la vie.
Setting aside my personal trials and tribulations in traffic, when it comes to investing, there is no such thing as driving too slowly.