- Investment and speculation are closely related.
- Both involve purchase of assets-shares & securities.
- It refers to the possibility of incurring a loss in a financial transaction
- High return is associated with higher risk
- Investor : commits his funds in low risk investment
- Speculator: commits his funds to higher risk investment to achieve high returns
- Speculator achieve profits through price changes – capital gains
- He is interested in capital gain rather than income from an investment
- Purchase of securities proceeded by proper investigation and analysis to receive stable income & capital appreciation
- Speculation associated with buying at lower price and selling at higher price to make large capital gain
- Speculator engages in frequent buying and selling transaction
- Investment is long-term in nature – waiting for returns at consistent basis.
- Speculator is interested in short term trade gain. Through buying and selling of instruments.
- Both investment and speculation aim at good returns but the difference is motives and methods
Investment some times described as a well grounded and carefully planned speculation