Investing vs. Speculating

Many people believe that anyone who trades in stocks is an investor; in reality most “investors” are really just “speculators.” Speculating is purchasing based on anticipated market movements or on forecasting, such as technical analysis. Speculation is how most traders make their buy and sell decisions.

Growth investing and day trading are forms of speculation. While profit can sometimes be made through speculation, there are questions surrounding the decision to buy or sell: If I buy now, how will I be certain the price will increase? When has the price reached its peak? Will it keep going up? Should I stay in this position? These questions show the uncertainty inherent in speculation. Investing is achieved when these questions have been answered.

Value Investing is the truest form of investing. Value Investors have a clear understanding of the value of the company they are considering. This is achieved through an analysis of the company’s past performance as well as the performance of similar companies. The valuation formulas of ValueMyStock allow an investor to perform this proper necessary mathematical analysis of their stock.

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” -Benjamin Graham, Father of Value Investing