Decisions on investments are determined by various factors like risk involved, return, purpose, period etc. Do you think there are differences between investment and speculation? If so, what are the differences? Give exa

Answer 6A(iii) Investment and speculation though look alike in several ways there are many differences between them. Basis for Comparison Investment Speculation Meaning The purchase of an asset with the hope of getting returns is called investment. Speculation is an act of conducting a risky financial transaction, in the hope of substantial profit. Basis for decision Basis for decision Fundamental factors, i.e. performance of the company. Hearsay, technical charts and market psychology. Time horizon Long term Short term Risk involved Moderate risk High risk Intent to profit Changes in value Changes in prices Expected rate of return Modest rate of return High rate of return Funds An investor uses his own funds A speculator uses borrowed funds. Income Stable Uncertain and Erratic Behavior of participants Conservative and Cautious Daring and Careless Examples for investments are bank deposits, post office schemes etc. Examples for speculation are stock markets trade, mutual funds, derivatives etc.