What is investing ?
Investing is an upon thorough analysis of a security (ex: Stocks,bonds,real estate) that promises safety & an adequoate return.
What is speculating?
"Predicting/Guessing" the future price of a security without doing thorough analysis of that security
Now we know the difference between these 2 there is still a missconception about investors. People tend to think that an investor is simply someone who is buying or selling a security( Ex: a Stock) which is not a true !!
An Investor knows what he is buying/selling because an investor did his homework and studied the security by doing analysis.
A Speculator doesn't know what he is buying/selling because he is only focussed on the short term price movement of that security.
Speculation can be unintelligent if you
- Are speculating when you think you are investing
- Speculting as a pastime , if you don't have enough knowledge / skillls
- Risking more money then you can afford to lose
Every NON-professional who trades securities on margin should recognize he is speculating .
For example someone who buys a stock because he heard it's a "hot" stock at the moment is speculating or gambling.
And let's say that hot stock went up and you took a profit on it you can think you are ahead of the game but it isn't true you just had some luck involved & luck won't help you on the long term