Speculation or investment

  • Apr 14 2017
  • by
  • Analyst AZA
Speculation or investment
Speculation or investment
Sooner or later, this choice applies to any trader or investor of the international forex market. What is better and more profitable - an opportunity to make long-term investments or a choice of speculative activity? The classical variant of investing involves the purchase of shares of the most top companies, as well as the ownership of acquired securities until they are the best of the best, and, accordingly, bring the desired profit to the investor. As for the concept of top or best companies, it is based on the criteria for selecting each market participant personally. The classical investment method was preferred by the legendary investor of all time, Warren Buffett, practising acquisitions of companies (which in his opinion are the best). Speculative investment or speculation is the other way around, buying undervalued assets. The shares, which are currently undervalued, but which can be sold at a price in the future are much more profitable (than the cost when buying). The range of possession of such instruments is diverse: it can range from a week to several years, but as a rule, this period is from 2 months to 6 months. Speculation is widely known for the use of different methods of analysis, both technical and fundamental. Nevertheless, how correctly to choose the direction of market activity? When choosing an investment option, it is not necessary to compare the risk and return indicators between the classical method and speculative activity: both options take place and, first of all, depend entirely on the investor's experience, knowledge and implementation of the plan. Of course, the choice of speculation provides an opportunity to receive higher profits for a relatively short period. But this applies to situations where the percentage of profit is stable and is approximately 15-16% monthly. It is also worth taking into account simple free funds: simple capital arises in the process while the investor is in search of or waiting for favourable opportunities for profitable speculation. That is why it is impossible to single out a more profitable way: both options are individual and largely depend on investor preferences. Another important aspect is the time spent by the investor. In this case, the differences between investment options are significant. Choosing a classic investment option, the investor spends the minimum amount of his time. While speculative activity involves significant temporary infusions: constant monitoring, monitoring and adjustment of portfolio management. For many people, this is essential and market participants do not want to feel burdened. The task of investment is to generate a passive profit. Speculation also implies active activity, full-fledged work on the part of the trader. This makes the speculative option very similar to a business. Buying an asset for 6 months or a year still implies activity from the exchange's player: every month he follows the market analyzes the situation and is looking for new lucrative opportunities, trying not to lose them. Therefore, to choose speculation or invest in long-term projects is a private matter for each investor. And the question is not the goals and objectives. After all, the main goals can be successfully combined - to lead speculation by top holdings, investments in which can be made in the long term. However, the main snag is connected with downtime: being in the waiting mode (investors are waiting for the cheaper, more profitable cost to buy), their funds are without work, and the profit is not increased. Nevertheless, in the case of frequent market monitoring, making accurate forecasts, effective analysis, the investor certainly will not sit out the fall of assets. Therefore, both methods of market activity have the right to exist. The main thing is to adhere to rational boundaries.
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Choosing a classic investment option, the investor spends the minimum amount of his time. While speculative activity involves significant temporary infusions: constant monitoring, monitoring and adjustment of portfolio management.

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