I was recently having a conversation with a local business leader about Bitcoin and “Meme Stocks”, two topics that have been in the financial news a lot in the past year. He posed the following question to me: What do you think about these investments?
My response to this question was to dig a little deeper with the following questions:
- What role will the money in question play in your overall financial plan?
- Will you need to rely on the money at some point? If so, when?
- What is the core desire behind wanting to consider speculation (high volatility and risk)?
I soon found through further conversation that his question about these “hot button” investing topics came up due to a current challenge happening within his organization. Some people on his staff had recently discovered “investing” in these types of speculation during the COVID shutdown. What started as casual lunchroom chatter between staff eventually grew into an ongoing, all-consuming daily distraction.
When we blur the lines between investing and gambling, things get very tricky. Investing requires patient discipline over many years in the market. It entails establishing a goal or objective and aligning your investing actions with that goal in mind. It also involves placing your money into prudent investments that are properly diversified and aligned with your ability and willingness to take measured risk. Prudent investing requires quite a bit of planning, both up front and on an ongoing basis. On the other hand, gambling is really just a form of entertainment. It can involve some level of excitement for those participating, but it can also be quite addictive. Gambling can consume a large amount of your time and resources. Gambling, or speculation, involves taking an extraordinary amount of risk for the very slim chance of a substantial gain.
Do not fall into the temptation to gamble when investing. Instead, take some time to consider what you value most in life and what your long-term goals are. Let those things drive the decisions you make with your money. These types of decisions are often made with the counsel of a trusted advisor, someone that has your best interest in mind and whose advice you value and trust.
Have you ever gotten caught up in ‘gambling’ rather than investing? We would love to hear from you. We are here to serve you with sound advice as you make investing & planning decisions.