Key Differences Between Investment and Speculation

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Investments and Speculations are two very different concepts. Major differences between investment and speculation are as follows:

1. Meaning

Investment: It is a purchase of assets with the expectation of regular return.
Speculation: it is a financial transaction with an expectation of capital gain or substantial profit.

2. Planning

Investment: It is a long term planning (at least one year or more).
Speculation: It is a short term plan (only for a few months/days/hours).

3. Risk Disposition

Investment: It involves only modest risk.
Speculation: It involves a higher level of risk.

4. Expected Rate Of Return

Investment: It expects a modest rate of return because of moderate risk.
Speculation: Due to the higher level of risk involved, it expects a higher rate of return.

5. Leverage

Investment: Investor’s own funds and the property is used.
Speculation: Generally borrowings from others are used.

6. Income Type

Investment: Income is certain and stable in investment.
Speculation: Income is uncertain and unstable in speculation.

7. Behaviour

Investment: Investor possesses caring and cautious behaviour.
Speculation: Speculator possess careless and daring behaviour.

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