Mark Cuban has presented an editorial on the differences between investing and speculating. He proposes that investors no longer exist and the vast majority of those in the market are speculators. He concludes with his own opinion about how corporate profits distributed to shareholders should be taxed. True investors in businesses would not be taxed, while speculators (or secondary investors) will not receive the benefit. Mark has some interesting ideas for reshaping the economy.
If you give your money to a mutual fund or hedge fund that puts money into public stocks and bonds, thats super speculation… Why Super Speculation? Because there is a 99 pct certainty that you are 3rd in line to get paid with whatever earnings the fund generates with your money.
First the fund itself has to get paid. They take money off the top. Then the person who makes the investment decision has to be concerned about keeping their job. You see if the fund doesnt outperform its peers or comp indexes, then the person who is responsible for the fund is out of a job.
Do you think that person cares more about putting a roof over his familyÃ¢â‚¬â„¢s head or you? Which means when push comes to shove, unless there are strict limitations, that fund manager is going to take the chances necessary to outperform his comps.
Updated August 9, 2011 and originally published September 25, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.