Investing Vs. Speculating: What’s The Difference? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Editorial disclosure
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: ANGELA WEISS/Getty Images August 24, 2022 Bob Haegele is a contributing writer for Bankrate. Bob writes about topics related to investing and retirement. Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. “Past performance does not guarantee future results.” You may have heard investment firms state this. In fact, the Securities and Exchange Commission (SEC) requires them to say so. If we can’t assume future results, wouldn’t that mean investing is the same as speculating? It might seem that way, but investing and speculating are, in fact, different. To understand the distinction, let’s break down the difference between investors and speculators. It’s important to know the difference so you don’t put all your money in speculative assets while thinking you are investing. What is investing
Investing is the process of exchanging money for assets that you can reasonably expect to increase in value over time, creating a capital gain. They focus on the performance of the underlying business rather than just the investment’s price. Investors tend to focus on long-term, incremental gains rather than big gains in just a few weeks or months. In the U.S., investors buy stock in publicly traded companies listed on exchanges such as the New York Stock Exchange or Nasdaq. These firms are required to publish quarterly earnings reports, allowing investors to evaluate the company’s financial health and make informed investing decisions. Investing is not risk-free, but it tends to be a more conservative approach rooted in the tangible success of a company. It’s not just about where the price of the asset will be in a few months. What is speculating
Speculating is buying assets with the hope of substantial gains, often in a very short time period. Speculators may enter and exit assets several times quickly. Speculative assets often have a significant risk of total loss in value, which speculators accept in return for a chance of high returns. Speculative assets often include unproven businesses as well as . Speculators tend to be hyper-focused on the price of an asset and less so on the underlying company’s competitive position, future success or productivity. They may rely more on rather than on an analysis of the strengths of a business. Speculators often watch prices of their preferred asset by the day or even by the hour. These assets can be highly volatile, so this close attention can be stressful for speculators. Examples of investments
Many types of investments are best for long-term appreciation and don’t require short-term speculation, though speculators may jump into these markets and create . High-quality stocks: Stocks allow you to buy a piece of ownership in a publicly traded company. In the context of investments, this generally refers to from established companies. It can also include investments such as and . Bonds: A is a form of debt that allows organizations to fund their operations. In return, the bonds pay a modest rate of interest. Investors typically favor , corporate bonds, plus and mutual funds. Real estate: is one of the oldest forms of investment and remains popular today. While real estate is not without risk, it tends to be a strong investment. Certificates of deposit (CDs): bear some resemblance to bonds but are primarily issued by banks and credit unions. CDs pay a modest rate of interest and are typically FDIC insured, meaning they’re as risk-free as an investment gets. Annuities: can be thought of as a form of retirement insurance. You pay either a flat amount upfront or over time, and in return receive a lump sum or regular payments in the future. Examples of speculative investments
These investments, while often popular, are also speculative in nature. Generally, you should be prepared to lose your entire investment if you put money into them. Cryptocurrencies: has its advantages, such as ease of currency exchange and transaction speed. While some cryptocurrency investors have made millions, many more have lost large sums of money. Commodities: are goods that are non-branded such as oil, gold, silver and agricultural goods such as corn and soybeans, among many others. Options: are contracts that allow you to buy or sell a stock by a specific time for a specific price. Traders can buy options contracts in order to speculate on price movements of different types of assets. Artwork: is a popular investment in some circles because it has the potential to rapidly increase in price. However, artists and artistic styles can rise and fall in popularity, causing a once-valuable piece of artwork to draw little interest from buyers. Collectibles: Collectibles can be almost anything that people like to collect, such as trading cards, toys, and comic books. Similar to artwork, interest in these can wax and wane rather quickly. Speculative assets are the kinds of things that . Comparing an investment vs speculative mindset
The line between investing and speculating can be fine. In fact, many speculators jump into investments and run up their prices. So it’s not only a question of the type of asset but your mindset will determine whether you end up investing in something or speculating on it. Take stocks, for example. Investors tend to buy stocks in a company with the intention of growing their money. They don’t often sell their investment, but instead hold it for years or decades. Many good investors think about the performance of the underlying business over a period of years, not just what the stock will do over the coming month. Speculators, on the other hand, sometimes buy and sell investments frequently. They might be influenced by the hottest trend, and their emotions can play a big role, too. Speculators may believe they can beat the market even though the average person fails to do so on a consistent basis. Bottom line
Investors take a systematic approach to growing their wealth, buying assets with reasonable levels of risk in exchange for long-term growth. Speculators, on the other hand, buy assets that may experience rapid growth but can also lose their entire value if they go out of favor. Popular assets such as stocks and bonds can be investments or speculative assets, depending on how you approach them. It’s important to know the difference, so you can properly manage the level of risk you take against your expected return. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. SHARE: Bob Haegele is a contributing writer for Bankrate. Bob writes about topics related to investing and retirement. Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Related Articles