Can you tell the difference between investment and speculation?


When most people contact the investment industry, due to lack of experience, they often do not know how to judge because of some financial problems, and even most investment novices cannot distinguish the difference between "investment" and "speculation", so what is the difference between them? How can we tell the difference?

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Investment is characterized by long-term investment, investors are willing to make physical investments or hold securities for a long time, some typical investment cases: for example, you invest in the company for a long time, properly operate, or you hold some stocks, bonds, art or real estate for a long time, these are investment behaviors.

The characteristic of speculation is that its term is short, speculators are keen on regular rapid trading, such as some short-term stock speculation, or commodity futures speculation, bonds, etc., these are speculation, mainly for a relatively short time.

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In fact, there are certain rules of operation in the stock trading market. Most investors often do not know whether they should sell the number of shares in their hands when the stock is rising, and are reluctant to sell at a loss when the stock is falling, with the result that they make very little money and lose a lot of money.

The short-term movement of stock prices is influenced by many factors, such as: the inflow and outflow of capital, the volatility of the market, resulting in short-term stock price movements, which are in fact quite random. This is the famous random walk theory, which states that the fluctuation of securities assets is random and that the price movements of the securities market are influenced by many factors, and that a small, insignificant event can have a huge impact on the market. As you can see from the long-term price charts, the chances of prices going up and down are almost equal.

While stock prices are random and difficult to guess in the short term, their long-term trends are predictable. Buying shares is the equivalent of investing in a company, you need to think of yourself as a shareholder in the company and manage it properly no matter what happens in the stock market so that you can make a profit and reap the rewards.

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Investment and speculation, the biggest difference is the length of time to hold the asset, investment is long-term holding, while speculation is short-term, based on short-term logic, will lead to their initial buying logic is different, the investor buy consider its long-term competitiveness, because he has to consider the future long-term holding, while the speculator he is not concerned about the long-term competitiveness of the company, even many people are not very concerned about the fundamentals, they just get They just get some good news, or some money direction, and do some short-term trading. Therefore, whether we are investing or speculating, we need to look carefully at each product in the stock market and then choose the one that suits us best in order to make a profit.