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

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Old May 30, 2006, 1:16pm   #1
 
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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.
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Old May 30, 2006, 1:34pm   #2
 
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Quote:
Originally Posted by Dispassionate
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.
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/.../l/blles2c.htm
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Old May 30, 2006, 1:35pm   #3
 
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hmmm, speculators cut throats, investors hope their throats wont be cut whilst holding their money.

Edit. Interspec.packs

Last edited by fxmarkets; May 31, 2006 at 11:38am. Reason: All speculation.
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Old May 30, 2006, 1:44pm   #4
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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.
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Old May 30, 2006, 1:45pm   #5
 
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Originally Posted by fxmarkets
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hmmm, speculators cut throats, investors hope their throats wont be cut whilst holding their money.
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?
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Old May 30, 2006, 2:05pm   #6
 
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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

Last edited by fxmarkets; May 31, 2006 at 11:39am. Reason: All speculation
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Old May 30, 2006, 2:17pm   #7
 
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investors chase income, speculators chase price

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

good trading

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Old May 30, 2006, 2:38pm   #8
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Originally Posted by barjon
maybe investors create the long term trend of the market and speculators create the noise
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.
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Old May 30, 2006, 2:48pm   #9
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An investor is a speculator who switches timeframes to avoid taking a loss.
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Old May 30, 2006, 2:56pm   #10
 
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Originally Posted by TheBramble
An investor is a speculator who switches timeframes to avoid taking a loss.
not the voice of experience talking there i hope, brambs

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