Finance 2027

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The Speculative Investing Fallacy

The Speculative Investing Fallacy

Part III - What Is Speculative Investing, Anyway?

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New Finance Institute
Feb 11, 2025
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One leading authority from a century ago genuinely believed common stocks were not investments. It took decades and a charismatic Ben Graham to set the record straight and deliver an important message to the masses: Common stocks are investments, but only sometimes.

This begs the question. What does sometimes mean? It means that the stock has to be cheap enough.

What does “cheap enough” mean? Cheap relative to what?

We covered “cheap enough” in detail in a previous post, but basically, it means cheap relative to the one’s value estimate of the stock.

So, if you knew that the value of an asset is $100, surely you would pay anything below $100 right? Anything below that amount would be investing as it is guaranteed return at zero risk. The trade would look like this:

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