Friday, April 27, 2012
The Art of Speculation: Introduction to Speculation
The Art of Speculation: Introduction to Speculation: Speculation as defined by the online Oxford dictionary is the forming of a theory or conjecture without firm evidence . A second definiti...
Tuesday, May 24, 2011
Monday, May 23, 2011
Introduction to Speculation
Speculation as defined by the online Oxford dictionary is the forming of a theory or conjecture without firm evidence. A second definition given is an investment in stocks, property, etc. in the hope of gain but with the risk of loss. Any of the above singular definitions does not entirely paint a picture of what it means to speculate rather all of the above.
Speculation occurs in our everyday lives, from our normal buying and selling, to our relating with our families, friends, co-workers, our environment and economy. The term, "Speculation," which is formally defined in Graham and Dodd's 1934 text, Security Analysis, contrasts with the term "investment," which is a financial operation that is based upon thorough analysis, promises safety of principal and a satisfactory return but I beg to defer because in all courses of action taken none is a 100% failure free. This can be seen in the recent financial meltdown envisaged the world over. So what then is speculation? Speculation I will define as any activity one undertakes as a result of a theory or hypothesis one has conceptualized with or without concrete proof or evidence to support ones’ actions. These actions could be taken relying on intuition, emotion, fundamental analysis, technical analysis or all of the above.
Speculation can also be viewed as gambling but then life itself is a gamble and in fact investments are gambles with different degree of financial burns or gains. We all are into one form of activity or the other and we step out everyday acting on faith and for some others on daily routines but in my view financially speaking, speculation is a financial action or activity that does not promise safety of the initial investment or capital but typically involves financing the purchase of assets, equity or debt but in a manner that might or might not have been given thorough analysis and is deemed to have low margin of safety with complementing returns or the gain is commensurate to the risk of loss of the principal investment.
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