The Differences Between Speculating And Investing

 

 

Every field has its jargon. This is not a way to exclude outsiders from the discussion, but simply how language has evolved to deal with concepts that can’t adequately be described using existing terms. Just as “profit” and “return” aren’t the same thing, investing and speculating are subtly different activities.

Essentially, investing is simply more conservative than speculating. There’s no definite line separating the two, and the same investor may follow a strategy incorporating aspects of both. The essential difference is that investing is most concerned with securing the value of the principal, while speculating means being willing to run greater risks, betting that the investor’s superior knowledge, market access or system will be enough to “beat the market” and generate returns that others can’t match.…