Forum Archive Index - March 2004

["Gavin Treadgold" <gav@rediguana.co.nz>]

> 2/ Speculation:
> 3/ Investing:

They both utilise "speculative risk" - that is the _potential_ for upside
and downside. Compare this with "pure risk", such as getting hit by a car,
which is nothing but loss. These are common text-book definitions of risk.

As you suggest, pure speculation has no risk management behind it. Investing
on the other hand has more research and effort is put into treating
(reducing, transfering) the downside risk, and attempting to improve the
upside. But investing is still dealing with a speculative risk, but analysis
has hopefully reduced the downside and increased the upside. Put simply...

Speculation + Risk Management = Investing

Cheers Gav



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