Stock Market Speculation

Stock Market Speculation:

 

Our discussion on investing in the previous article brings us to our next topic which is ‘Speculation’.

 

So what exactly is speculation?

Speculation in laymen’s term simply means buying of an investment vehicle for a particular duration of time (usually for less than a year) to simply profit from the price movements of that investment vehicle.

 

Does speculation only happens in stock market?

The answer is big fat “NO”.

Speculation is everywhere, it’s all around us and yet people link it to market changes.

Many people speculate in many fields unknowingly and end up losing their hard earned money.

The main areas of speculation are stock markets (you already knew that…right), so basically it happens with bonds, commodities, currencies, collectibles, real estate, futures, options etc…

 

Let’s take a very simple example that we use in our daily lives.

Suppose you buy a house or a land ground, since the real estate market is in boom, and want to make good money by selling it when the prices go up.

This becomes speculation, if you buy the property at high valuations just because the markets are going up.

 

What would you do if the real estate prices dropped or even worse, if you had bought the property using a loan?

This kind of speculation is what causes great losses that you hear among people in stock market and other areas.

 

Keep in mind that speculation is good if you know what you are doing and you have a high expertise in the field you are speculating about.

We will talk more about speculation and its types in the coming articles so bare with me on http://www.basicsstockmarket.blogspot.com  and keep track of the previous and upcoming articles on it.

Stock Market Speculation