As complex humans, our approach to life, and investing, is usually multi-faceted. Most of us have at least a little of the speculator in us, and hopefully a lot more of the investor. For the purpose of this exercise, we’re going to examine our investment style in black and white. Divide a fresh piece of paper into two columns labeled Speculator and Investor, leaving a few inches at the bottom of the page to write yourself another prescription. Now, take a moment to reflect on your past investment behavior. In the Speculator column, list 3-4 instances where you behaved like a speculator in your investment accounts. Describe any positive/negative results you experienced with this approach, considering the emotional and financial impact speculating had on you and your portfolio. Now turn to the Investor column to list and describe instances when you behaved more like an Investor. As in the previous column, detail what did/didn’t work for you.
Finally, move to the bottom of the page to write down The Prescription, which is exactly the same for both Speculators and Investors: Invest more and speculate less. This Prescription can be a lot harder for a Speculator to follow, especially if you’ve had some success playing the market. I know it feels counterintuitive to stop doing what’s always worked well for you and take a different approach. And I know being an Investor isn’t the only viable path. But the research I’ve read about long-term investment success and the anecdotal evidence I’ve gathered while watching clients blow themselves up with speculative trading strategies has convinced me that Investing is the best path. Commit to taking a walk on the less wild side!