In contrast, speculators are daring and careless.Īt the end of this discussion, it can be said that both are different and should not be used interchangeably. The psychological attitude of investors is conservative and cautious.In speculation, the stability of income is absent it is uncertain and erratic which is not in the case of investment.Conversely, speculator uses borrowed capital for speculation. The investor uses his own funds for investment purposes.On the contrary, a speculator expects higher profits from the speculation in exchange for the risk borne by him. An investor expects the modest rate of return on the investment.As opposed to speculators who expect profit from the change in the prices, due to demand and supply forces. The investors, expect profit from the change in the value of the asset.The quantity of risk is moderate in investment and high in case of speculation.Hence, it has a longer time horizon than speculation, where speculators hold assets for short term only. Investments are held for at least one year.On the other hand, in speculation decisions are based on hearsay, technical charts, and market psychology. In investment, the decisions are taken on the basis of fundamental analysis, i.e.The term speculation denotes an act of conducting a risky financial transaction, in the hope of substantial profit. Investment refers to the purchase of an asset with the hope of getting returns.The basic difference between investment and speculation are mentioned in the points given below: Key Differences Between Investment and Speculation
Speculation ca be seen in markets where the high fluctuations in the price of securities such as the market for stocks, bonds, derivatives, currency, commodity futures, etc. Although, the risk is taken by speculators is properly analysed and calculated. In speculation, there is a high risk of losing maximum or all initial outlay, but it is offset by the probability of significant profit. Speculation is a trading activity that involves engaging in a risky financial transaction, in expectation of making enormous profits, from fluctuations in the market value of financial assets.
In fixed income investment there is a pre-specified rate of return like bonds, preference shares, provident fund and fixed deposits while in variable income investment, the return is not fixed like equity shares or property. fixed income investment and variable income investment. Investments are majorly divided into two categories i.e. Nowadays, there is a range of investment options available in the market as you can deposit money in the bank account, or you can acquire property, or purchase shares of the company, or invest your money in government bonds or contribute in the funds like EPF or PPF. The two main element of investment is time and risk In a wider sense, it refers to the sacrifice of present money or other resources for the benefits that will arise in future. Investment refers to the acquisition of the asset, in the expectation of generating income. Hearsay, technical charts and market psychology.
Speculation is an act of conducting a risky financial transaction, in the hope of substantial profit.įundamental factors, i.e. The purchase of an asset with the hope of getting returns is called investment. So this article makes an attempt to clear the differences between investment and speculation. The basic distinguishing point amidst these two is that income in the investment is consistent, but in the case of speculation is inconsistent. Conversely, speculation is an activity which does not satisfy these requirements.
#Time horizon definition economics professional
As per Benjamin Graham, an American economist, and professional investor, investment is an activity, which upon complete analysis assures the safety of the amount invested and adequate return.
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