## What is speculation and why do many people confuse it with Investment?

Have you ever wondered why some people make quick money from the stock market while others suffer heavy losses? The answer lies in the difference between **speculation is what** and genuine investing. These two concepts sound similar, but they lead to two completely different paths resulting in different financial outcomes.

## From theory to practice: How are Speculate and Investment different?

Speculate (speculation) is when you bet on price fluctuations over a short period, usually less than a year, sometimes just a few weeks or days. You do not care about the actual intrinsic value of the asset, only about predicting whether the price will go up or down. When speculate, you accept very high risk — potentially losing a significant amount of money, but also having the chance to earn enormous profits in a very short time.

In contrast, Investment (investment) involves buying an asset with a long-term strategy of 20-30 years, based on thorough analysis of the true value of a company, industry, or real estate. Genuine investors do not wait for daily price fluctuations but focus on stable returns from dividends, interest, or long-term appreciation. The risk here is lower, but profits are also slower and more gradual.

## Why can a speculator make money faster?

Speculators often use more powerful tools such as **CFD (contracts for difference)**, margin trading with leverage up to 1:200, or even short selling stocks. These strategies allow them to make significant profits from small market price movements. For example, if you speculate on biotech stocks waiting for drug approval from regulators, or invest in startups without profits, you could multiply your investment tenfold in a few months — or lose it all.

Derivative instruments, including options (options), futures (futures), and CFDs, are the main channels for speculators to implement their strategies. A well-known broker like **Mitrade** offers support for CFD traders with free demo accounts, allowing you to practice with $50,000 virtual money before risking real funds.

## Investment is safer — but is it sufficiently profitable?

Smart investors often choose safer routes:

**Savings accounts** backed by the government, with fixed but low interest rates. **Government bonds** from developed countries are almost risk-free — governments can print money to pay debts, though this may weaken the currency. **Blue-chip stocks** (large companies like Apple, Microsoft) are less likely to go bankrupt, with stable stock prices over 5-10 years.

A popular strategy is investing in **index ETFs** — funds that track market capitalization and include all the top stocks. The probability of earning long-term profits is high, but you must accept slower returns compared to speculation.

## The big question: Should you speculate or invest?

Everyone has a different risk appetite. If you have a stable job, don’t need immediate cash, and can tolerate price volatility over the coming years, then **investment** is the smarter choice. You will avoid emotional mistakes that speculators often make.

However, if you understand the risks well, have knowledge of technical analysis, market psychology, and are willing to accept losing money, then **speculate** can bring spectacular short-term gains. The way to achieve those profits is through **active account management** — not just sitting passively like investors.

## Risks and rewards: Is there a way to measure them?

In financial markets, risk is measured by **standard deviation** (sigma) — a statistical indicator showing how much stock prices fluctuate around the average. Unusually high sigma, as in cryptocurrencies, signals a speculation field rather than investment.

During periods of high market volatility caused by war, natural disasters, or economic crises, all assets face higher risks. But these are also times when well-strategized investors with stable psychology can generate significantly larger profits.

Golden rule: **No risk, no reward**. Savings account interest cannot protect you from inflation, so you need to balance both investment and speculation.

## Practical strategy: Diversify your portfolio

Professional investors know that sometimes speculation is necessary to boost portfolio returns. However, increasing speculation also raises volatility and instability. Knowing how to distinguish between these two types helps you decide the appropriate portfolio ratio for each.

The first step is to assess your acceptable risk level based on your financial capacity, income diversification, and portfolio management skills. Even if you have plenty of money to diversify, without enough time and knowledge, you only increase the risk of losing money. Conversely, moderate diversification helps you reduce the risk of "putting all eggs in one basket."

## Conclusion

Speculate and investment both have their place in your financial portfolio. The key to sustainable success is having sufficient knowledge, up-to-date information, and psychological discipline. Learn to speculate like a pro if you want quick money, but also don’t forget to build a solid long-term investment foundation for your future.