[Pen-l] Speculation

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[edit] Investment vs. Speculation
Identifying speculation can be best done by distinguishing it from
investment. According to Ben Graham in Intelligent Investor, the
prototypical defensive investor is "...one interested chiefly in
safety plus freedom from bother." He admits, however, that "...some
speculation is necessary and unavoidable, for in many common-stock
situations, there are substantial possibilities of both profit and
loss, and the risks therein must be assumed by someone."[3] Many
long-term investors, even those who buy and hold for decades, may be
classified as speculators, excepting only the rare few who are
primarily motivated by income or safety of principal and not
eventually selling at a profit.

Speculators can be increasingly distinguishable by shorter holding
times, the use of leverage, by being willing to take short positions
as well as long positions. A degree of speculation exists in a wide
range of financial decisions, from the purchase of a house to a bet on
a horse; this is what modern market economists call "ubiquitous
speculation."[citation needed
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