When you are speculating or investing, it involves trading. Trading is the process of buying, or selling. We don’t know your purpose behind the trade.
Gambling is an activity that may or may not involve trading. In trading, a commodity can be bought and sold. In gambling, the ticket or the bet you wager can’t be sold. Gambling usually gives greatest outcome in the shortest duration if it succeeds.

Trading
Definition: buying or selling securities or commodities

Gambling
Definition: The voluntary risking of a sum of money on the outcome of a game or other event.

Speculating
Definition: Trading with the purpose of making profits.

Investing
Definition: The act of using money to make more money

When I buy a company share, I can sell it at any time and it is called trading.
When I buy a share without knowing anything about the company, just based on mere rumors, it is called gambling.
When I buy a share and would definitely sell it weeks or months later when it has appreciated in value, it is called speculating.
When I buy a share after understanding the company’s business model, future planning, cash flow management etc and I am very confident that it is undervalued, and will buy more when the price drops, it is called investing.


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Are you trading? Gambling? Speculating? or Investing?


KCLau
KCLau

Personal finance author and trainer

    3 replies to "Are you trading? Gambling? Speculating? or Investing?"

    • […] Are you trading? Gambling? Speculating? or Investing? […]

    • Peter Lim

      When i read the above definition, i can’t see much difference, especially between Speculating and Investing. I prefer Ben Graham’s definition on Investing, and my mother’s definition of Gambling (or Speculating).

      Ben says, ““An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

      My mother told me, “Anything that involves Winning or Losing is Gambling (or Speculating)”.

      To me, that 2 definitions is very clear. When i invest, i only ask myself 1 question, “Can i lose money?”. If the answer is Maybe, Not Sure, i’ll skip.

    • […] is called gambling. Most often the attempts to make a quick buck lead to losing a […]

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