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Chapter 11. The Retail Investor: Victim ... > How Important Is the Freedom to Spec...

How Important Is the Freedom to Speculate?

Some people associate speculation with freedom, saying that the opportunity to be a winner or a loser is a key element of freedom. To them, it follows that financial speculation is worth preserving for everyone in society, no matter how ill-prepared or lacking in financial assets.[81] But surely this is not the case for people who didn't know they were speculating in the financial markets, but thought instead that they were in prudent, though hopefully lucrative, investments.

Did small investors in America transfer savings and pension money into mutual funds knowing they were speculating? Was this disclosed to them? Did they understand the dynamics by which mutual funds competed for investment dollars and so abandoned prudence; or by which mutual fund managers were paid for beating competitors' performance, and so abandoned prudence for speculation, to keep up with the others?


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