What is the difference between investing and speculating?
The main difference between speculating and investing is the amount of of risk undertaken in the trade. Typically, high-risk trades that are almost akin to gambling fall under the umbrella of speculation, whereas lower-risk investments based on fundamentals and analysis fall into the category of investing. Investors seek to generate a satisfactory return on their capital by taking on an average or below-average amount of risk. On the other hand, speculators are seeking to make abnormally high returns from bets that can go one way or the other.
It should be noted that speculation is not exactly like gambling because speculators do try to make an educated decision on the direction of the trade, but the risk inherent in the trade tends to be significantly above average. As an example of a speculative trade, consider a volatile junior gold mining company that has an equal chance over the near term of skyrocketing from a new gold mine discovery or going bankrupt.
With no news from the company, investors would tend to shy away from such a risky trade, but some speculators may believe that the junior gold mining company is going to strike gold and may buy its stock on a hunch. This would be speculation.
CREATING AND INVESTMENT THAT CAN WITHSTAND MARKET SHOCK.
- Before you Begin Building your Complete Financial Portfolio – have someone to check your process
- Contribute to Your SSS With Your Employer’s Matching Funds & ensure it goes to work
- Pay Off High-Interest Credit Card Debt – stay away from bad debts but is okay to create good debt that builds your income generating assets
- Open Stock market Account
- Purchase a Home – and make sure is fully paid
- Build a Twelve-Month Emergency Reserve
- Pursue Other Investment Opportunities
- Invest in Yourself – learn to enjoy your life while you are building an Investment Portfolio
- Ensure you have a risk management for you and your loved one planned.
STEPS TO BUILD YOUR INVESTMENT PORTFOLIO AND NOT SPECULATE. (Min investment timeframe should be at least 3 years)
- Step 1: Determining the Appropriate Asset Allocation for You
- Step 2: Achieving the Portfolio
- Step 3: Reassessing Portfolio Weightings
- Step 4: Rebalancing Strategically
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High Risk Investment Warning:
Please note that Forex and other leveraged trading involves significant risk of loss, It is not suitable for all traders and you should make sure you understand the risks involved, it is recommended that you seek an independent advice, if necessary.