What's the difference between a speculator and an investor?

Quite frankly I don't think there is any. You often see the press blame hedge funds or speculators for market volatility. There simply is no correlation imo.

Dispassionate said:

Quite frankly I don't think there is any. You often see the press blame hedge funds or speculators for market volatility. There simply is no correlation imo.

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Technically there is a difference IMO. See below.

Speculator

A person who trades (i.e. derivatives, commodities, bonds, equities or currencies) with a higher-than-average risk, in return for a higher-than-average profit potential. Speculators take large risks, especially with respect to anticipating future price movements, or gambling, in the hopes of making quick, large gains.

investor

A person who purchases income-producing assets. An investor as opposed to a speculator usually considers safety of principal to be of primary importance. In addition, investors frequently purchase assets with the expectation of holding them for a longer period of time than speculators.

http://beginnersinvest.about.com/cs/investinglessons/l/blles2c.htm

1 view.

hmmm, speculators cut throats, investors hope their throats wont be cut whilst holding their money.

Edit. Interspec.packs

Dictionaries tend to differentiate investment, speculation and gambling by defining different risk or payout levels to the definitions.

A percieved investment may turn out to be a complete gamble if the incorrect risk level had been assigned to undertaking in the first place. Best to call it all gambling in my view, so that you look at the worst possible scenario of all undertakings first. There really is no such thing as a safe investment.

fxmarkets said:

1 view.

hmmm, speculators cut throats, investors hope their throats wont be cut whilst holding their money.

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A rather extreme view, one I would expect from the lips of a Klingon rather than the logical Dr. Spock.

Speculators, IMO, get the blame for a myriad of the world's woes when in essence are they not merely a reflection of the collective unconscious?

i could use, stealing all the sweets off a baby asleep in a pram, dreaming nice dreams of sweets if thats a better one....... easier to swallow ,so to speak.

must be some more.... bloodhounds, vultures, hmmm some kind of savvy pack association at work.

As for being blamed, many a business is this business so its got the green light as acceptable business.

Edit. Inter spec. packs

investors chase income, speculators chase price

maybe investors create the long term trend of the market and speculators create the noise

good trading

jon

barjon said:

maybe investors create the long term trend of the market and speculators create the noise

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That depends on how you define investors. In all markets it comes down to supply and demand to create trends. In forex, for example, who are the investors? Are they the carry traders holding USD against the JPY to make the interest rate differential? Are they the central banks? Are they multinational corporations who do exchange transactions as part of their business?

There is a tendency to think from a stock market perspective only when considering the differentiation between investors and speculators. That's not a real surprise given that holding periods in other markets (futures, forex) are shorter by definition.

The thing the talking heads forget when they decry speculation is that those traders provide market liquidity - a major benefit to the system. Do they add to the volatility? Good question. I'd love to see research on what price movement would look like if there were no speculators.

An investor is a speculator who switches timeframes to avoid taking a loss.

TheBramble said:

An investor is a speculator who switches timeframes to avoid taking a loss.

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not the voice of experience talking there i hope, brambs

jon

Saddle Up..... ?

hmmm also speculators are not without risk of being eaten alive by their own kind if they wander against the pack ,

I remember reading old monty roberts and his Join up technique with wild mustangs years back how the head mare would send away any frisky young mustang that was going against their own pack , this young mustang was dominated by this mare continually driven off for miles , the mustang would then slowly wander back to the pack look for and until the mare signals that the mustang is allowed and may rejoin the pack and tow the line.

maybe with speculators if you go against the pack you/and your money will be driven off until you become submissive and go with the pack.

I relay this Join Up technique which monty termed ,to the speculation pack, which should not be confused with the crowd.

I refer to a pack of horses for illustration point only. not herds etc.

Good read too that book. The man who listens to horses.

http://www.montyroberts.com/ab_about_monty.html


Edit Intra spec. pack

Speculators will put more emphasis on market sentiment and price action (the psychology of momentum) in determining their activities.
Investors in the truest sense are much more interested in the financial activity that underlies their investment than with what the market thinks of that investment at any given moment.

For example....many speculators came out of the woodwork to flip properties over the last couple of years without having any real clue as to how those properties were valued over the longer term and thus what returns they might ,or might not bring. Some made money and some did not.
Investors who had bought into that same market much further back according to known fundamental values ,such as rental and capital returns and everything that influences them sold to those speculators in quite a big way ,but again ona basis of fundamental values. So some speculators did very well and some did very poorly, but I can assure you all good investors did the very best of all and of course some people who thought they were investors ,but were really speculators are still doing poorly.

Investors come in for quite a lot of nonsense from people who are basically stupid, not a word I use lightly. These people naively think investors , or good investment is 'buy & hold'..what nonsense. A good investor will find find 'gold' before any speculator as the first clue what is happening. Similarly a good investor will sit back and happily watch speculators to run prices up until they have NVD'd the investment parameters for the next 10 years then they will sell them the 'gold' for whatever scraps are left for the speculators to fight over. What do you think selling into a rising market actually means ...LOL

So some speculators did very well and some did very poorly, but I can assure you all good investors did the very best of all and of course some people who thought they were investors ,but were really speculators are still doing poorly.

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You seem to speculate that investors do well and speculators don't.

No I don't ,read it again carefully if that is what you think at this point.

Excellent post chump #12, thank you.

It clearly highlights to me anyway In my own posts i was ranting on Inter and Intra Speculation Packs. Head too close to the screen , thanks again.

fx.

An investment is a speculation gone wrong.

They're just words

A lot of it's about image and pretension.

Speculator is a term often used in a negative light. For example, when banks accuse speculators of devaluing their currencies.

Investor is often used when the media wants to imply that a punter has been particularly smart or astute in some way.

At the end of the day they're just words. When my mates ask me what I did during the day, I'll say something like "stock XXX looked underpriced so I took a punt - you have to speculate to accumulate!". I don't generally say "I invested in stock XXX because the P/E ratio was...." as they'll all know that I'm just talking s***.