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LORD JESUS CHRIST SAYS

and whoever wants to be first must be slave of all. For even the Son of Man did not come to be served, but to serve, and to give his life as a ransom for many.”

30 Jun 2015

INVESTOR Vs SPECULATOR

Hi, Speculation is about taking up the business risk in the hope of achieving short term gain. Speculation essentially invokes buying and selling activities with the expectation of making  profit from price fluctuations.  Suppose a person buys a stock  for its Bonus, he may be termed as an investor.  If he buys with the anticipation of a price rise in the near future and the hope of selling  it at a gain, he would be termed a speculator. The dividing line  between speculation and investment is very thin because people buy stocks for Bonus and further capital appreciation.

The time factor involved in speculation and investment is different.  The investor is interested in a consistently good rate  of return for a long period.  He is primarily concerned with direct benefits provided by securities in the long run.  The speculator is interested in getting an abnormal return .  In simple terms, the investor wants a higher rate of return  than the normal return  in the short run.  The speculator’s investment are made for short term.  The speculator is more interested in market action and its price  movements.  The investor constantly evaluates the worth of security,whereas the speculator evaluates the     price   movements.  He is not worried about fundamental factors like his counter part, the investor.

The investor would try to match the risk and  return.  The speculator would like to assume greater risk than the investor.  Risk refers to the possibility of incurring loss in a financial transaction.  The negative short term fluctuations after the speculations more than the investors.  The risk factor involved in the investment is also limited.  The investor buys the stock after studying the factors related with the concerned company,s stock.  This limits the risk exposure.  The investor likes to invest in securities where the principal would be safe.

A speculator keep his holding for a short period i.e. holding periods varies from days to  months.  Speculator undertake high risk.  He is always consider information, here says and market behavior.  Probably he uses borrowed funds to supplement his personal resources.  But you see the investor plans for a longer time horizon.  His holding period may be more than one year to few years.  Considers fundamental factors and evaluates the performance of the company quarterly.  Uses his own funds, and avoids borrowed funds.

From my experience I realized that speculation get result of loosing money.  But as an investor I got profit @15% and above.  Luck factor is also there.

Good luck.                                                                         See you later.