Investment & Speculation.
Investment & Speculation
15-Jun-2008An article as clearly-written as that by David Kerr in Actuary Australia November 2007 on the extreme suitability of shares for producing retirement income is long overdue. I too am a risk-averse income-focussed investor, which is why I have 100% of my investment portfolio in Australian shares – nothing in any other asset class and nothing foreign!
David gave some informative examples showing the risks to retirement income of investing in non-share assets. In fact, income is what investing, as opposed to speculating, is all about.
My definitions of investment and speculation are:
- An investor’s reward is a dividend stream, whereas a speculator’s reward is a realised capital gain.
... which is equivalent to ... - An investor gets his reward from the maintenance of his holding, whereas a speculator gets his reward from the disposal of his holding.
... which is equivalent to ... - An investor gets his reward from the investee company, whereas a speculator gets his reward from other investors or speculators.
What really matters to a retirement investor from an investment portfolio is the cash income it produces and the manner in which that income will increase over time in relation to community incomes and costs of living, ie AWE and CPI.
- To read on, please click here to view the PDF.