Difference between investment,speculation and gambling.pdf

Differences between investment, speculation and gambling

1. Definat

einvestment

-Employment of funds
On assetsWith the aim
Of capital apprication.

e Speculation + Gambling

- Buying and selling. — - Taking high risk
Of securities not only for high
Within a very return but also
Short period of time. Also for thrill and

Thrill and joy.

2. 2 jective

+ Investment e Speculation + Gambling

- Capital gain + - Only to gain - rational people
regular income , high return Gamble for fun
safety and excitement or
stability of thrill.
returns.

3. 3.Nature

e Investment + Gambling

4

- Carefully planned. - Planned. - Unplanned
and scientific

4. 4. Risk

+ Investment © Speculation + Gambling

Low RISK! PTS

- Low risk. - Moderate to
high risk

5. + Speculation + Gambling

=

”

- Fundamental - Technical analysis - No analysis
analysis {tips & rumors)

6. e Speculation + Gambling

- Long term, - Short term - Short term

7. 7.Return

e Investment

- Current income

(Interest, dividend).

Low return

+ Speculation

- Capital gain.
High return

+ Gambling

- Capital gain
High return

8. 8.Examp

e Investment e Speculation + Gambling

- Can be stocks. tocks options, — -Horserace,
bonds, MFs, futures etc. Lotteries,

interest bearing card games,
Casino's ,

estate , gold online betting
and anything

or believe wil
produce income

9. Example of coin toss game
Po INVESTMENT SPECULATION [GAMBLING |

Rs, 100 Rs, 100 Rs, 100

%oftimeyouneediobe 40% 50% 66.6%
right to breakeven

(On. great day You make money You make mon You make money
(always right)

On an ordinary day You make money You break even You lose
(ight half the time)

‘Ona bad day You lose money You ose money You ose money
(always wrong)

Rational this isa Great postion Losing position
Insummary There is reasonable The payosisi One is taking a chance,
Expectationofprofic herisk payofls Is notin line wi

the risk