Learning Materials For Accounting, Management , Finance And Economics.

Sunday, December 17, 2017

Difference Between Investment And Speculation

Major differences between investment and speculation are as follows:

1. Meaning

Investment: It is a purchase of assets with the expectation of regular return.
Speculation: it is a financial transaction with an expectation of capital gain or substantial profit.

2. Planning

Investment: It is a long term planning (at least one year or more).
Speculation: It is a short term plan (only for few months).

3. Risk Disposition

Investment: It involves only modest risk.
Speculation: It involves higher level of risk.

4. Expected Rate Of Return

Investment: It expects for a modest rate of return because of moderate risk.
Speculation: Due to higher level of risk involved, it expects higher rate of return.

5. Leverage

Investment: Investor's own funds and property is used.
Speculation: Generally borrowings from others are used.

6. Income Type

Investment: Income is certain and stable in investment.
Speculation: Income is uncertain and unstable in speculation.

7. Behavior

Investment: Investor possess caring and cautious behavior.
Speculation: Speculator possess careless and daring behavior.