spot_img
HomeBUSINESSSpeculating vs Investing

Speculating vs Investing

-

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Benjamin Graham

Example of Investment and Speculation

An investment is buying an asset with intrinsic value that has cash flow and/or physical asset value. Speculating is buying something in an expectation of future price appreciation based on the belief that price will go higher based on others buying it or it becoming valuable or creating cash flow in the future.

Investment

Investments are stocks in companies that make profits and have assets, real estate, businesses, and cash flowing assets.

Speculation

A speculation is a bet on a stock that currently doesn’t make money but should become profitable in the future. Also buying a crypto digital asset believing that people will want to buy it from you at a higher price at a later date is a speculation. Speculators buy based on price action and the potential for higher prices based on market psychology not underlying financial numbers.

Investing Examples

Buying a stock that pays a dividend is an investment.

Buying a stock that has a low price that doesn’t accurately reflect the future discounted cash flows of the underlying company or asset value.

Buying a real estate property to rent out to tenants that creates cash flow that is greater than the mortgage debt payment.

Speculating Goal

The goal of a speculation is to buy an asset with a higher probability of going higher than the entry level and exit at a higher price. Or the inverse sells short with the expectation to buy back at a lower price level. The speculator’s goal is to make money on the price action on the chart based on technical analysis or market psychology not intrinsic fundamental value.

“If somebody had told me my method would not work, I nevertheless would have tried it out to make sure for myself, for when I am wrong only one thing convinces me of it, and that is, to lose money. And I am only right when I make money. That is speculating.” – Jesse Lauriston Livermore

LEAVE A REPLY

Please enter your comment!
Please enter your name here

LATEST POSTS

Forex Signals in Indonesia

Free Forex signal, Technical trading analysis in Indonesia are provided by top forex trading experts. Join and Start receiving forex signals.

Forex Signals In Canada

Forex Signals In Canada are provided by top forex trading experts. Daily opportunities for forex signal with expert advice and guidance.

10 Price Action Trading Tips That Will Help You Become a Better Trader

The first step to becoming a better trader is abandoning you own opinions, predictions, and emotions in favor of trading the price action itself. Uptrends, downtrends, and trading ranges on charts become more clear when all personal biases are removed.

Trading Method Definition

A trading method is a specific process and theory for approaching the financial markets in an established way to make money. A trading method brings orderliness of thought and behavior for planning and implementing a trader’s action for the philosophy behind entries and exits.

Follow us

23,698FansLike
10,400FollowersFollow
743FollowersFollow

Most Popular

ADVERTISEMENTS

- Advertisement -spot_img