Now, are you ready to invest or do you think that the buying and selling of shares is speculation? If yes, than there is no fault of yours. Some people even goes to the extent of calling it gambling. But, this is simply spurious.
When you buy a share after proper consideration of the company's future prospect, your risk is limited. When you do so with insufficient knowledge about company's past, present and without spending enough time in the assessment of company future, the risks are comparatively much greater. Investment and speculation are the two sides of the same coin. Speculation is the intense form of investment, in the matter of attaining your goal i.e., earning profit.
The investor plays in the safe-side for moderate profit. The speculator deliberately takes high risk because of greed for greater profits. They are considered as short-term members of the stock market family. They buy securities with a view to selling them for profit, and usually ignore dividends.
When a speculator expects the future price of share to rise, he purchases that in hope of earning profit in future by its sales. Such speculators are called “Bulls”. There is another class of speculators, who expect the price of securities to fall, and therefore, enters into agreement to sell them promising to give delivery in future by purchasing those securities at lower prices and earn profit out of price differentials. They are called “Bears”. The point to be noted is that speculator often plays around with borrowed money to buy shares with the intention of earning both long-term capital gains and dividends.
Investors and speculators are the two parallel paths to the stock market. Both are in operation all the time. Nevertheless, it is not necessary that you should speculate. Infact, I strongly advice you against it. You can expect to gain more with sufficient knowledge and analysis under controlled risks. And, the fact is that in the stock market, long-term investors very rarely lose, comparatively to speculators.
Shivani
MS (Communication)
