When participating in any investment field, such as real estate, stocks or bonds… you will often encounter the terms INVEST and INVEST a lot.
So how do you differentiate between INVESTMENT and INVESTMENT? What is the biggest difference between investment and speculation? Well, in this article I will help you clarify this more.
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#first. What is investment?
Investment is when you have some money and use it to contribute to an organization or an individual for the purpose of earning a higher return than the initial capital.
In other words, an investment is when you contribute your own money, efforts, or resources to an individual, an organization or a certain type of property.
I already have a very detailed article about the concept of investing, you can read it here: What is investment? Are you misunderstanding about Investment?
#2. What is speculation?
Speculation (also known as surfing, in securities, it is called a trader) is the act of buying and hoarding an item or product in large quantities when the price is still low, creating pressure on the market. become short on this item and then sell it at 2-3 times the price to eat the difference, this is called speculation.
For example, in 2019-2020, realizing that the epidemic situation is complicated, some individuals have hoarded a large amount of masks, causing a shortage in the market, leading to a sharp increase in mask prices. Then these individuals sell for many times the difference! There is no shortage of people getting rich from masks.
#3. The benefits and harms of speculation
One thing that you should keep in mind is: Anything that generates quick profits also comes with a high degree of risk. You definitely need to be careful if you choose the path of speculation over investment.
Usually, when you participate in stock market then you will hear and even experience speculation several times.
For example, if a stock rises quickly and falls sharply, if you speculate to buy while this code is still low price and sell it in time when the price is at its peak (before the price drops deeply), you will win and make a big difference. .
On the contrary, if you are greedy and keep it for a long time with these codes, you will probably get Up Boaccount fire is normal.
You are not a big hand, so don’t expect to control the market and also don’t dream of beating the market by speculating on arbitrage. This is a mistake that investors often have to pay when they enter the stock market and then hold a grudge against the stock.
#4. Distinguish between speculation and investment
Just imagine it like this:
Speculation is when you use money to buy something profitable in a short time. In the stock market or call investors like this is a surfer, a trader.
Advantage of speculation is very profitable, not buried for a long time.
Defect This is a high risk, there is a risk of holding a toy if the price does not increase as expected or for some other reason, the market suddenly drops sharply while you have not yet sold.
Investing is when you use that amount or more to buy an item or invest in shares of a company for a long time.
You buy that item or ticker because you believe in the company’s future growth, not immediate profits. There are companies and products that take years to build momentum and you accept that.
Investing is still risky, but compared to speculation, it seems to be somewhat less.
Below is a table comparing the biggest differences between INVESTORS and INVESTORS.
| INVEST | SPECULATIVE | |
|---|---|---|
| HOW TO MAKE PROFITS | Make a profit by investing in an asset and hoping it will grow over time. In general, investors make money through the growth of the company/enterprise… that they invest in. | Make a profit by eating the difference between buying and selling in a short time (for example, common assets such as stocks, bonds, real estate, gold, fund certificates….). In general, speculators make money through price movements. |
| INVESTMENT TIME | The long-term holding period is based on the analysis of the intrinsic value of the company. That is, they must see the potential in the field they invest in. | Short-term holding periods, hours, days or months.. Speculators are usually more interested in technical analysis, and through rumors, news, following the psychology of the crowd, are row key… |
| PLACE OF INVESTMENT | Care about the real value of where they invest. | Not interested in the real value but only the price difference. |
| Desired PROFIT | Desire to make a stable, sustainable, long-term profit…
Profits are usually not high immediately, easy to predict, generally quite stable profits. |
Expect to make a lot of profit in a short time.
Profits are volatile and unpredictable. It can be x2, x3 assets for a short time, but also sometimes account burns and heavy losses. |
| CAPITAL | Investors often use their own capital, play as much as they can without borrowing capital, using financial leverage. | There are also users with their own capital, but most software uses credit and financial leverage (debt) is a lot. |
| RISK | Investment will have a lower level of risk, more controllable. | High level of risk. |
This does not mean that speculation is gambling. It also depends on your acumen, if you are sharp, analyze the market well, speculation will be many times more profitable.
This depends on your ability, usually speculating, you will have to focus 100% of the time on the product you are speculating, in order to take profits in time. As for investment, you determine that for many years, you have more time to do other things.
Investment and speculation will not be right and wrong, only suitable or not suitable for each person or not.
Okay, so through this article, I believe you have a clearer view of difference between investment and speculation then right? Hope the information in this article will be useful to you, good luck!
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Edit by Kien Nguyen
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