The Speculative Investor | Value Research It's almost funny how a long-term investor will turn into a speculator when the money is available…

The Speculative Investor

It's almost funny how a long-term investor will turn into a speculator when the money is available…

It seems that a huge rally in the price of any asset can transform a steady investor into an aggressive speculator, rather in the manner of the full moon turning meek individuals into werewolves baying for the blood of human beings. A couple of days ago, at a meeting with some investment advisor in Ahmedabad, I came across a tale of such a transformation. This advisor had a new client whose savings capacity was limited to about Rs 1,500 a month. He convinced the customer to start an SIP in an equity fund.

From the sound of it, the advisor worked hard and persisted with the investor, despite it being a somewhat high-effort and low-income account. The investor kept at it and eventually accumulated a decent sum of money after about a couple of years. Then, one day recently, the investor told the advisor that he would like to redeem the entire amount. The reason, as he told the advisor was that he intended to use the money to speculate on silver. The investor felt that he had missed a big part of the huge rally in silver and wouldn’t like to miss the rest of it.

At one level, this is almost funny. Here’s an individual who starts building up a nest egg using a sensible long-term strategy but as soon as the savings reach a reasonable amount, his mind turns to speculation. Maybe this has something to do with the investing culture of the city where he belonged to, or perhaps this is just human nature. Perhaps the only reason why a lot of people don’t speculate on high-risk assets is that they don’t have the money readily available. All of sudden, when the money is available, a steady SIP investor starts panicking about missing the rally in silver.

I guess some are born speculators, some achieve speculation and some have speculation thrust upon them. Guess which category our friend belongs to.

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