Why Investment is Speculation
55Unknowingly many of us are trained to believe in many things which they are not. When it come to handling money and its end use, there is one such thing that has been going on for atleast the last 100 years.
Well, you guessed it right. Investments. Money held back does no good to anybody. Money generates more when it is circulated. But there are lots of myths associated with the usage of money. That is whether you are Investing it in another asset or just speculating with it for a quick gain.
Generally it is accepted that by investment it means one put his money into any asset and holds it for a reasonably long period. governments world over has recognised such investments or blocking of funds and has granted tax breaks for it.
Speculation on the other hand is when one use the money to make gains of short term nature, while taking unacceptable level of risks. Such gains are treated as short term capital gains and taxed.
When one starts expecting some kind of return from any assest, unknowingly sets the speculative instincts to motion. Expecting a change in price or value of the asset is definitely amounts to speculation, whether it is held for short term or long term.
Small investors are always encouraged to invest in long term. They have been told that it is not good for their financial security. Partially they are right. But only partially. I too agree with it. Trading in any asset has to be with some kind of expectations. The moment one sets a future price, there begins the speculation. Generally many funds commit funds in a short term trading and convert it into long term investment holdings when their expectations are not met. If the prices drop, then it is rationalised by classifying them as investment holdings.
Investment gurus, fund manager and analysts love to preach about the virtues of investing to the small investors. In reality when one watches most of their statements, it can be understood all their analysis are short term and speculative in nature.
How do you feel? Looking forward for your critical comments.
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Comments
i agree with you, on certain aspects. while speculating, one cannot be blind. speculation definitely needs thorough knowledge and analysis. protecting one's capital and at the same time deploying it for a reasonable return is definitely a part of speculation. A Speculator has to accept his mistake and contain the damage to his capital as that protects him to grab a favourable opportunity another day.
hubber-2009 says:
13 months ago
An investment, based on knowledgeable and thorough analysis, offers a high probability of security of capital and a return. A speculation also involves analysis, with a potentially higher return but with less security.