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Investment Vs. Speculation

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April 24, 2009 – Comments (0)

I'm rereading "Margin of Safety" and came accross a great explanation of the difference between investing and speculating.

An investment gets it's value from the future cash flows it will produce.  A speculation generates no cash flow and only cash they generate are from their eventual sale.  The value of a speculation relies entirely upon the supply/demand of that item.

 Any thoughts?  I thought this was a great way of describing the entire concept of value investing.  Buying things which are inexpensive relative to the cash flow which they will produce.

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