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Warren Buffett

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Speculation

 

Speculation is an investment action made under intentions to earn large profits in short term. Usually such actions are very risky and lays somewhere between investing and gambling. It is hard to say where exactly the investing ends and speculation starts, but if you can lose all your invested money or more, it is definitely a speculation or even gambling. Equally, most speculative decisions are made with expectation to predict the future when chances are low.

 

Even if a speculators sound negatively, they provide more liquidity for the financial markets which is very important and saves a lot of costs for other investors. 

 

em>Speculation is very popular action in reality, and the reason of it is a human nature. People, especially young people, wants to see the results as fast as possible, and the lack of patience force them to take risky decisions believing that they can predict future and can do it better than the rest of the market. The interesting thing about speculation is that most speculators would not agree that they are speculating while they are deeply convinced that they are investing like everybody else just maybe in a bit riskier way. 

 

Speculation also may have different meaning which is not much related to investments. The trading of goods when a tradesman buys some goods from one person and immediately sells to another without any created additional value also sometimes is called a speculation too. 

 

 






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