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Speculative and productive investments

Posted by admin on October 10, 2017 in Finance, Investment with No Comments


Investment and speculation have something in common. Both of them can generate income though in different ways. Before making an investment, people typically do a thorough market research to find out whether it would be profitable to put their money into the business. There are various ways to invest – start one’s own businesses, buy property or shares in a promising company. Most of them require a direct participation of the investor. They are supposed to run a business or renovate the housing they lease out. The case with speculators is very different.
People who speculate on prices are not fully-fledged market participants. The moment they find certain market conditions lucrative to play on, they participate immediately. Otherwise, they just stay aside and monitor where to put their money and get the largest revenue right away. Speculators usually act like intermediaries reselling goods or services. They gamble and win if prices on the goods they have purchased suddenly skyrocket. Importantly, speculators do not provide any services to charge customers. They practically make money out of thin air inflating prices on popular products.
In terms of getting an immediate revenue, gambling can be effective. Speculators who can perfectly forecast recent market trends, usually earn a generous sum momentarily. But when we think of a stable long-term income, productive investment is the only way to generate it. Earning a surplus may take some time but businesses or property can sufficiently expand over the years. Investment certainly contains a risk, but investors still can choose an option with the lowest risk. Productivity is a core condition of safety. Without producing things we can only gamble, which poses a great risk to the property we own.

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