Are you investing or speculating?
When you last bought a parcel of shares, were you investing or speculating? The term speculation carries some negative connotations, evoking thoughts of risk and recklessness, and is probably not one many of us would want to identify with. It’s a distinction that often arises in financial journalism and marketing, with money managers typically laying claim to the investor label to convey that what they are doing is good, wholesome and professional, and not prone to misadventure. But where exactly is the line between speculation and investment, and how do you tell which side you’re on? When finance professionals use the term they are usually drawing a distinction between buying an asset in the hope of profiting from movements in its price, and buying an asset in hope of benefiting from the underlying attributes of the asset. In simple terms, buying a cheap stock with a view to selling in down the track when it is fully valued is speculation. Buying the same stock purely to benefit from the stream of future dividends is investing. Read more here: (VIEW LINK)
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Roger Montgomery founded Montgomery Investment Management, www.montinvest.com in 2010. Roger has than three decades of experience in investing, financial markets and analysis. Roger also authored the best-selling investment book, Value.able.
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