Are you investing or speculating?

When people are speculating, but they think are investing? Here is the definition from


West's Encyclopedia of American Law

What is investment?

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Investopedia Says:

The building of a factory used to produce goods and the investment one makes by going to college or university are both examples of investments in the economic sense.

In the financial sense investments include the purchase of bonds, stocks or real estate property.

Be sure not to get 'making an investment' and 'speculating' confused. Investing usually involves the creation of wealth whereas speculating is often a zero-sum game; wealth is not created. Although speculators are often making informed decisions, speculation cannot usually be categorized as traditional investing.


To me, it is just very simple, are you holding any hard or soft asset after the purchase? If the answer is no, then it is not categorized as investing. Can you call koala a bear? The koala is not a bear.