There is a very thin and blurred line between investing and speculating (or gambling). To have a clearer understanding of this, we would differentiate between the two.
There is a tendency for investors to be speculative when the markets are bullish and buoyant. However, for long term and profitable survival in the markets we must try and control this urge to speculate. After all, we are here to learn and apply investment management and not speculation management.
To be part of the speculative herd in a bull market situation has been the waterloo of many participants in the financial markets across the globe. This participant maybe an individual investor, a NBFC, a financial institution, a pension fund, a bank, or a brokerage. Some are responsible corporate citizens while others are not.
| Investor | Speculator | |
| Planning horizon | Relatively long, holding period of at least 1 year. | Very short, holding period a few days or weeks. |
| Risk disposition | Moderate, rarely high risk. | Normal to assume high risk. |
| Return expectation | Moderate returns at limited risk. | High return at high risk exposure. |
| Basis for decisions | Fundamental factors, careful evaluation of proposed investment. | Relies on hearsay, tips and market psychology. |