Speculation: Meaning, Functions and Evils | Stock exchange

Speculation is the act of trading in an asset or conducting a financial transaction that has a significant risk of losing most or all of the initial outlay with the expectation of a substantial gain. With speculation, the risk of loss is more than offset by the possibility of a huge gain, otherwise there would be very little motivation to speculate. It may sometimes be difficult to distinguish between speculation and investment, and whether an activity qualifies as speculative or investing can depend on a number of factors, including the nature of the asset, the expected duration of the holding periodand the amount of leverage.

Buying property with the intention of renting it out would qualify as investing, but buying multiple condominiums with minimal down payments for the purpose of reselling them quickly at a profit would undoubtedly be regarded as speculation.

Speculators can provide market liquidity and narrow the bid-ask spreadenabling producers to hedge price risk efficiently Speculative short-selling may also keep rampant bullishness in check and prevent the formation of asset price bubbles. Mutual funds and hedge funds often engage in speculation in the foreign exchange, most traded etf options and stock markets.

Speculation

The market trades around the world 24 australian based binary options 85 a day; positions can be taken and reversed in seconds, utilizing high-speed electronic trading platforms.

The market is dominated by asset managers and hedge funds with multi-billion-dollar portfolios.

Speculation in the FX market can be hard to speculation in stock exchange market from hedging, which is when a company or financial institution buys or sells a currency to protect itself from market movements. For example, a sale of foreign currency related to a bond purchase can be deemed either a hedge of the bond's value or speculation; this can be especially complicated to define if the currency position is bought and sold multiple times while the fund owns the bond.

It includes debt issues by governments and multinational corporations. Prices can be very volatile, and they are strongly influenced by interest rate moves as well as political and economic uncertainty.

The largest single market is for U. While many pensions and individual retirement accounts are for long-term investments, market movements are frequently driven by speculators. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam.

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education.

Speculation Definition & Example | Investing Answers

Speculator Speculative Stock Speculative Flow Dual Currency Service Investment Funding Currencies International Currency Markets Bond Option Double Hedging. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

The Art Of Speculation

Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.