👌👌👌Investment Vs Speculation 👌👌👌
We always listen near our surroundings, investing is a game of speculation or the share market is a game of speculation. That's why people do not invest or hesitate to invest in the share market. This happens due to people don't differentiate between the words investment and speculation.
Understanding the two basic words Investment and Speculation is the very first step to achieving investment success in the financial world.
Financial market participants can be divided into two groups investors and speculators. Assets and securities can often be characterized as either investments or speculations. The distinction is not clear to most people, In both groups, they can be bought and sold.
Investors think of stock as a piece of paper representing as fractional ownership of underlying businesses. They think buy and sell decisions on the basis of the current price of the stock in the stock exchange (NSC/BSE) compared with the perceived or intrinsic value of those securities. They believe that over the long run stock prices tend to reflect fundamental development involving the underlying businesses.
Investors expect the gain in the following ways:
- Business generated free cash flow.
- Buy a stock between share price and underlying estimated business value underlying
- Sell a share when the price crosses the underlying estimated business value.
Speculators buy and sell stock based on prices. Their judgment is totally based on price, not the underlying business value. They buy a stock because they "act" well and sell when they don't.
Speculators are:
- Obsessed with predicting
- guessing the direction of stock prices.
Succeeding in the financial market, requires an appropriate mindset or approach like an investor or speculator. I personally think participating in the market an investor-like mindset or approach. Your investment decision is based on the value in relation to price.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock.
