speculation

Speculation

The process of selecting investments with higher risk in order to profit from an anticipated price movement.

Notes:

Speculation should not be considered purely a form of gambling, as speculators do make informed decision before choosing to acquire the additional risks. Additionally, speculation cannot be categorized as a traditional investment because the acquired risk is higher than average.

More sophisticated investors will also use a hedging strategy in combination with their speculative investment in order to limit potential losses.

See also: Hedge, Speculation Index, Speculator, Take a Bath, Take a Flier, Venture Capital

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Speculation

Purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss. A profitable strategy over the long term if undertaken by professionals who hedge their portfolios to control the amount of risk.

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speculation

The taking of above-average risks to achieve above-average returns, generally during a relatively short period of time. Speculation involves buying something on the basis of its potential selling price rather than on the basis of its actual value.