Speculation vs investment

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Speculation vs investment

  1. 1. Investment Vs Speculation 1
  2. 2. What is Investment ?• Investment involves making a sacrifice of in the present with the hope of deriving future benefits.• Postponed consumption• The two important features are : – Current Sacrifice. – Future Benefits. 2
  3. 3. Cont…• It also involves putting money into an asset which is not necessarily marketable in the short run in order to enjoy the series of returns the investment is expected to yield.• People who make fortunes in stock market and they are called investors.• Decision making is a well thought process.• Key determinant of investment process: – Risk – Expected Return 3
  4. 4. What is Speculation?• Speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum.• Its is usually short run phenomenon.• Speculator the person tend to buy the assets with the expectation that a profit cane earned from subsequent price change and sale. 4
  5. 5. Process of Investment and Speculation 5
  6. 6. Investment vs. Speculation Basis Investment Speculation1. Basis of acquisition Usually by outright Often on Margin purchase2.Marketable Asset Not necessary Necessary3.Quantity of risk Small Large 6
  7. 7. Investment Vs Speculation Basis Investment Speculation4.Insider trading analysis Not possible Based on insider trading transaction happen5.Stability of Income Very stable Uncertain and erratic6.Sources of income Earning of enterprises Change in market price7.Length of commitment Long run For a short time period 7
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