So what are you?

I thought I might offer my take on the differences between savers, investors, speculators and gamblers.

Saver: A saver is someone who consistently sets aside some portion of her income for use in the future. The saver delays the gratification that comes from spending today and instead reduces current consumption below what her total income would allow her to spend.

The saver puts the money that is not spent in some kind of an account that will be secure and grow modestly in value. The saver's primary objective is to preserve the monies saved. Therefore, she will likely put her funds in an account that is guaranteed by the federal government. The money might be invested in a bank product like a savings account, interest-bearing checking account, a bank money market account or a certificate of deposit. All of these bank products are eligible for Federal Deposit Insurance (FDIC) up to a legal limit of $250,000.

The smart saver will seek to put enough into "safe" investments, so that emergencies can be met from these funds. A rough rule of thumb suggests that three to six times monthly expenses should be set aside in an emergency fund. The saver can tap this fund if her car needs repairs, an appliance must be replaced, or to get through a brief period of unemployment.

Investor: An investor is someone who is willing to accept investment risk with the expectation of receiving a return proportionate to the risk. The greater the risk of loss of principal, the greater the expected return.

Savers become investors once their emergency funds are fully funded. Savers should not "invest" funds that belong in their emergency funds. However, once the emergency fund has been fully funded, the investor should become an investor as well.

The investor will consider a wide universe of investments such as individual securities (e.g. stocks and bonds), mutual funds, exchange traded funds, limited partnerships or investment trusts. In fact, there are many kinds of investment that may appeal to the investor.

Speculator: A speculator is someone who is willing to accept a very high level of risk with the hope that she will be rewarded with a very high return. The speculator accepts a very high probability that she may lose some, or all, of her investment. The risk of loss with speculation is greater than it is with investing.

There are many ways to speculate. One can purchase an interest in a wildcat oil exploration project, raw land subject to future development, a start-up company with no revenue and in many other ventures. The speculator reviews information related to an opportunity that requires funds, evaluates the risks and potential returns and decides to participate or not based on her own assessment

Gambler: A gambler is a different kind of risk taker. The gambler has no ability to assess risk. He is willing to part with money for the hope that he may receive a large sum in return. Gambling is based on random outcomes and, as a result, the gambler has no influence over the outcome. People who part with their money in casinos are gamblers.

Gamblers seem to gain satisfaction from entertaining the possibility that they may receive a large "reward" for participating in the gamble.

So, what are you?