“An investment operation is one which, upon thorough
analysis promises the safety of invested capital and an adequate return.
Operations not meeting these requirements are speculative”
Speculation is always fascinating, and it can be a
lot of fun only if you are ahead of the game.
Investors are the ones who look for a value of a
stock when they purchase. They consider things like business past performance,
quality of the management, future potential growth, and value of the business
by taking into account future cash flows. While speculators mainly focus on the
price fluctuation of the stock. Without the prospect of substantial gains,
there would be little motivation to engage in speculation.
In another word, investment is when a security or an
asset is purchased to hold it for a long-term period with a view that it will
gradually increase in value over that period. Speculation can be considered a
more risk-based transaction where the sole purpose is to profit from that
transaction which is generally a short-term and often a single transaction.
Investment involves the allocation of money towards
purchasing an asset, which is not to be consumed in the present but hoping it
will generate stable income or is expected to appreciate in the future.
Speculation does not have a precise definition but
involves purchasing an asset to profit from subsequent price changes and
possible sales. The speculation involves a relatively higher level of risk and
more uncertainty.
People who invest make money for themselves, and people who speculate make money for their stock brokers. Keep in mind you must never delude yourself into thinking that you are investing when you are speculating.
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