What’s the Difference Between Investing and Speculating?

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Apr 02, 2015
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Behavioral Finance, Question of the Day, Investing, Current Events

Answer:  Your time horizon.

From Carl Richards, author of the One Page Financial Plan:

investing-is-not-the-same-as-speculating

More from Carl Richards:

“When people talk about investing, they often confuse it with speculating or trading. This confusion isn’t surprising.  The financial entertainment industry has convinced us that investing success depends on predicting what the markets will do next. But predicting the markets is easier said than done.

As a result, we end up frustrated, even scared, by what we “think” is investing. In reality, investing is about what we want to happen in the long term, not what happens day to day. Investors get to ignore the market’s daily or even weekly performance.  Speculators, however, can’t help but lay awake at night and worry what will happen tomorrow.”

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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