How Smart Are You Really?

A handful of investments - some up more than 100-fold and one up more than 1,000-fold - have made a dramatic difference in my personal net worth. How do you identify them? [Shield] AN OXFORD CLUB PUBLICATION [Liberty Through Wealth]( [View in browser]( SPONSORED [WOAH! I've Never Seen Him Do This Before...]( [Marc on stage]( The Oxford Club's Chief Income Strategist Marc Lichtenfeld is so confident that [this $7 stock]( has the potential to AT LEAST double over the coming year... That today, he's gearing up to do a few things he has NEVER done before... - For the first time in his 20-year career, he's going to tell you about a single investment he plans to personally invest thousands in... alongside YOU. - To avoid any conflict of interest, he's going to give YOU a head start to get in... before he loads up on October 24. - He's offering an IRONCLAD GUARANTEE to anyone who takes advantage of this opportunity. [Get the full details here...]( EDITOR'S NOTE Huge breakthroughs in artificial intelligence will soon change everything around you... Yet many investors - eager to profit from this trend - are engaging in a lot of not-so-smart speculation. That's why Alexander Green is sitting down with [investing legend Whitney Tilson]( at 1:30 p.m. ET TODAY. Tilson is predicting [a major upcoming event that will completely upend the markets](. It involves a new development in AI. And both Alex and Whitney say that some stocks are going to get hammered by this... while [others will rocket higher in some of the biggest moves we've ever seen](. Their event is entirely free to attend. Simply reserve your spot [HERE](. [Register for the Free Online Event]( - Rachel Gearhart, Associate Publisher THE SHORTEST WAY TO A RICH LIFE [How to Master the Art of Smart Speculation]( [Alexander Green | Chief Investment Strategist | The Oxford Club]( [Alexander Green]( It's often said that one good speculation is worth a lifetime of prudent investing. I know this to be true from personal experience. A handful of investments - some up more than 100-fold and one up more than 1,000-fold - have made a dramatic difference in my personal net worth. How do you identify an investment with the potential to go up severalfold? There is a process. I call it mastering the art of intelligent speculation. Let's start by defining our terms: investor, trader and speculator. Investors measure their returns in years - or decades - and ignore short-term fluctuations. (Typical investment selections include blue chip stocks, index funds and high-grade bonds.) Traders, on the other hand, measure their returns in weeks or months. They don't ignore short-term fluctuations. They seek to capitalize on them. (Typical trading vehicles are small caps and midcaps, hypergrowth stocks, and other high-beta equities.) Speculators seek even higher short-term gains. They are willing to risk more - potentially the entire investment - to achieve their goals. (This category includes options, futures, and options on futures.) The three categories - investor, trader and speculator - are not mutually exclusive, of course. In my experience, the best approach is to be a long-term investor who also trades regularly and speculates occasionally. Intelligent speculators, in my view, combine the best qualities of each. They are short-term oriented and willing to risk more in the pursuit of much-higher-than-average returns. But they are also willing to hold longer term if it maximizes profits. SPONSORED [Dems PISSED?! (This Could Ruin the Green New Deal)]( [Alexandria Ocasio-Cortez]( A nuclear breakthrough is taking the world by storm... One company just signed an energy deal with the U.K. for $5 billion in annual revenue through 2050 (and 40,000 jobs)... And that's just the beginning. An August announcement could 10X this $3 stock over five years. [Get In NOW (Before You Lose Your Chance!)]( To better understand intelligent speculation, let's consider four types of speculation that are generally not smart. 1. Market timing If part of your speculation is based on a guess about what the market - any market: stocks, bonds, currencies, metals, commodities - is about to do next, it is fundamentally flawed. I am a militant agnostic on this subject. (I don't know what the market will do next - and no one else does either.) Everything about the future that is known or highly probable is already discounted in stocks by rational, self-interested investors. (That's why academics call financial markets "efficient.") What will move stocks tomorrow or next week is tomorrow or next week's news. We can't know that now. And betting on the unknowable is gambling, not intelligent speculation. 2. Investing in things you don't understand Warren Buffett missed the dramatic run-up in internet stocks more than two decades ago. He also sidestepped their complete meltdown. Why? Because he didn't understand them. In Berkshire Hathaway's annual report at the height of the tech-stock mania, he said, "We have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement." If you are an expert on angel investing, private equity, arbitrage or technology-driven high-frequency trading, go knock yourself out. The rest of us can reasonably pass on these categories. 3. Illiquid securities You wouldn't enter a building without clear, easy-to-find and well-marked exits. The same should be true in your portfolio. Always prefer securities that are easy and inexpensive to trade, have plenty of volume (i.e., high liquidity), and have no surrender penalties. To me, intelligent speculation means giving a pass to most hedge funds, annuities, art and collectibles, private equity, venture capital, and options that trade by appointment only. You should be able to exit any speculation on a moment's notice and - especially in today's world of deep-discount brokers - at little or no cost. 4. Penny stocks It may seem reasonable to you - as it appears to be to so many investors - that it is easier for a $1 stock to go to $2 than it is for a $50 stock to go to $100. I can assure you this is not the case. Plenty of research confirms it. Unfortunately, the same studies do show that it is a whole lot easier for a $1 stock to go to zero than it is for a $50 stock. I could get into a long, technical explanation of why penny stocks do not outperform higher-priced ones, but let the following suffice. Corporate officers and directors receive much of their compensation in the form of option grants. That means the better the stock performs, the higher their compensation. If penny stocks truly outperformed, wouldn't they simply split the stock down to a dollar a share and reap the rewards? They don't because they wouldn't. The share price of a stock tells you nothing about its upside potential. Analyzing sales and earnings growth, profit margins, and quality of management does. These are just a few examples of the wrong ways to go about speculating. In my next column, we'll look at the best ways. Intelligent speculation is not an oxymoron. And following just three important principles - which I'll lay out in my next column - will dramatically impact your real-world returns. Good investing, Alex [Leave a Comment]( [IU 2024]( WEALTH OPPORTUNITIES - [He's 2.5X'ed Berkshire Hathaway (Here's How...)]( - [Alex Green's New #1 Alternative Investment (It's Just $12!)]( [Panic?]( [Click here]( to watch Alex's latest video update. 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