Are you calling yourself an investor? There are fundamental differences between an investor and speculator. This presentation delves into that. Foreword A lot of people have the notion that putting down a sum of money in a 3-4 letter ticker is an investment. They straighten their back, pull their shoulders back, chin up and proudly announce that they are “investors”. Funny how these people only go as far as to say “the market is crazy isn’t it?”, and are usually the ones that buy and sell the most. They consider long term to be 1 or at most 3 months.

1. Are You A Speculator
or Investor?
By Jae Jun
www.oldschoolvalue.com

2. What You Will Learn
1. What and who are investors?
2. The difference between a speculator versus
an investor
3. Why speculators are growing by the
numbers
4. Why you should listen to Warren Buffett’s
words of wisdom
5. Last piece of advice

3. Foreword
A lot of people have the notion that putting down a sum of
money in a 3-4 letter ticker is an investment.
They straighten their back, pull their shoulders back, chin
up and proudly announce that they are “investors”.
Funny how these people only go as far as to say “the
market is crazy isn’t it?”, and are usually the ones that buy
and sell the most.
They consider long term to be 1 or at most 3 months.

4. Symptoms of a speculator
1. Someone who is actively engaged in the market.
2. Looking to get in and out of positions, thinking they can
time it perfectly like a Swiss watch.
3. Speculators buy and sell off the tiniest of noise
generated in the news, overreact and start dumping
stock at a time.
4. The average speculator or trader is caught up in the
emotion and starts to follow, thinking someone knows
something that they don’t.

5. Warren Buffett
“We believe that according the name
‘investors’ to institutions that trade
actively is like calling someone who
repeatedly engages in one-night
stands a ‘romantic’.”

6. What and who are investors?
1. Investors aren’t worried about the daily fluctuations of
the market.
2. They know price follows value.
3. Investors know they have no control over Mr. Market.
4. Investors act with conviction, after valuation, on just a
few opportunities.
5. Investors strive hard not to fool themselves and repeat
past mistakes.

7. “He (Buffett) didn’t
become a billionaire by
chasing after mediocre
opportunities”.
Charlie Munger

8. Rise of the speculators
Why the rise?
The internet made buying stocks so easy.
Good and bad.
● With discount brokers such as Zecco
offering $0 trades, people feel free to trade
without any regard.

9. ● So now we have a scenario where people
are tadpole speculators to begin with but
soon they become toad-like traders.
● The key concept regarding brokers is that,
the more you trade, the more your broker
earns. The less you trade, the less your
broker will earn.

10. Buffett makes it clear that: “Brokers are paid
for activity. Investors are paid for inactivity.”

11. Long term Lucy meets trader Tim
● We have Lucy who invests $10,000 in 5
stocks for 5 years with a modest 9% rate of
return.
● She sells her entire portfolio after 5 years
and pays 15% tax in long term capital gains.

12. Trader Tim’s strategy
● Tim also invests the same amount of
money (as Lucy) at the same 9% rate of
return but trades the entire portfolio twice per
year.
● But he must pay 35% tax for his short term
capital gains.

13. Lucy Vs. Tim results
● After 5 years Lucy ends up with $95,994
and
● Tim ends up with $54,362 after 5 years.

14. How did Lucy win?
● Because Tim’s portfolio turnover is twice a
year which means he only makes 10 trades
per year.
● 10 trades isn’t much you might think, but the
difference is clearly in the numbers.

15. More wisdom from Buffett
“The Stock Market is designed to
transfer money from the Active to
the Patient.”

16. “I never attempt to make money on
the stock market. I buy on the
assumption that they could close
the market the next day and not
reopen it for five years.”

17. “One is only allowed one punch
card, with twenty investment
punches. Therefore, an investor
will be more selective to invest
only in his/her top investment
choices. Only twenty wonderful
investment ideas are needed in
an investor’s lifetime.”

18. Last piece of advice
Think long and hard before you make your next
investment. Actually, sleep on it and then think
again.

19. Old School Value
Jae Jun (jae.jun@oldschoolvalue.com)
http://www.oldschoolvalue.com
Old School Value improves your investment
decisions and performs deep fundamental
analysis and valuation for you. Just like a
personal stock analyst.