speculation

spec·u·la·tion   (spěk'yə-lā'shən)    n.   Contemplation or consideration of a subject; meditation. A conclusion, opinion, or theory reached by conjecture. Reasoning based on inconclusive evidence; conjecture or supposition. Engagement in risky business transactions on the chance of quick or considerable profit. A commercial or financial transaction involving speculation. Engagement in risky business transactions on the chance of quick or considerable profit. A commercial or financial transaction involving speculation.

Speculation

The process of selecting investments with higher risk in order to profit from an anticipated price movement.

Investopedia Commentary

Speculation should not be considered purely a form of gambling, as speculators do make informed decision before choosing to acquire the additional risks. Additionally, speculation cannot be categorized as a traditional investment because the acquired risk is higher than average.

More sophisticated investors will also use a hedging strategy in combination with their speculative investment in order to limit potential losses.

Related Links

Introduction to Types of Trading: Fundamental Traders
Futures Fundamentals

See also: Hedge, Speculation Index, Speculator, Take a Bath, Take a Flier, Venture Capital

speculation

The taking of above-average risks to achieve above-average returns, generally during a relatively short period of time. Speculation involves buying something on the basis of its potential selling price rather than on the basis of its actual value.

Main Entry: spec·u·la·tion
Pronunciation: "spe-ky&-'lA-sh&n
Function: noun
: an act or instance of speculating: as a : assumption of unusual business risk in hopes of obtaining commensurate gain b : a transaction involving such speculation