The inaugural Future of Finance Forum produced a lengthy transcript with a wealth of insights and perspectives. To help guide you to the essence of the discussion, Jason Voss, CFA, provides a summary.
For centuries many of the world's leading investment thinkers have struggled to articulate the difference between "investing" and "speculating." We've assembled a panel of leading investment practitioners to discuss the issue in our inaugural online forum.
How do speculation and investment differ? Meanings of the terms in the professional money management industry reflect popular usage.
Hyman Minsky has become famous in the aftermath of the financial crisis for his characterization of the three phases of markets – hedge finance, where the borrower can repay interest and principal out of cash flows; speculative finance, where cash flows can repay interest but not principal, and therefore need to roll over any financing; and Ponzi finance, where cash flows cannot pay either principal or interest and therefore must either borrow more or sell assets to support those costs.
What is the difference between investing and speculation? At first, you think the answer is simple because the distinction is obvious — that is, until you actually put pen to paper and try to answer the question.
John Bogle’s story is an oft-told tale, yet even Bogle junkies will learn some fascinating new facts from the latest book by the founder of the Vanguard Group. Every thoughtful investor can benefit from his wisdom, served up with refreshing modesty by a giant in a field notorious for outsized egos.