Long-Term Investing

Rational Speculator

Loosely quoting Steven Saville here (can’t find the article):

Most people invest 100% of their money hoping for 10% return. Rational speculator invests 10-20% of the money hoping for 100% or better return.

This is why I’m attracted to junior miners. Haven’t really benefitted in any significant way from them yet, but I’ll give some time.

10-20% is enough if the potential return is that great. With higher returns comes (much) greater risk, so even if you found what you feel might be a life-changing investment opportunity, do not put all your money on the line. If that 10-20% is lost, you’ll still be solvent.

Going forward I think I’ll allocate even smaller amounts to individual stocks, somewhere in the range of 7-10%. That’s my sound sleeping point.

Math Illustration:

$20,000 x 10% = $2,000 return
$4,000 x 100% = $4,000 return

I feel both types of investments – safe and speculative – have their place in some balanced portfolios.