Investment vs Speculation: Insights from the book "The Intelligent Investor" and its Applications to the Cryptocurrency Market
$BTC In the first chapter of the book "The Intelligent Investor", Benjamin Graham distinguishes between investment and speculation, a fundamental distinction that is the cornerstone of his investment philosophy. Graham defines "investment" as the process that relies on a thorough analysis of securities, provides safety for capital, and achieves a sufficient return. On the other hand, "speculation" is anything that contradicts this definition — that is, making financial decisions based on expectations, without solid analytical foundations.
$ETH Graham sees that most individuals — and even some institutions — confuse investment with speculation. Buying a stock simply because of the expectation of a quick rise without analyzing the company's profitability or financial strength is speculation, not investment. Although speculation can yield profits in the short term, it carries significant risks and can lead to substantial losses, especially when relying on emotions or rumors.
When applying these concepts to the cryptocurrency market, the importance of Graham's insights becomes clear. The majority of participants in this market act purely speculatively, buying digital currencies based on expectations of price increases, without considering the intrinsic value of the project, the development team, or the practical application of the technology used. This exposes their capital to severe risks.
