1) What does random walk mean in terms of investing?
A “Random Walk” is used to describe the theory that past trends and changes cannot be used to predict future prices in the stock market.
2) What’s the difference between investing and speculation?
Speculating involves a high-risk investment for potentially huge profits while regular investment is a low-risk financial decision that uses past data and analysis to predict the outcome.
3) If my investments worth $10,000 in 1995 were worth $10,100 in 1999, what happened to the purchasing power (how much stuff I can buy) of my investments over this time?
Because the price is not heavily inflated over time, the purchasing power would not be affected in a devastating manner.
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