What Is A Speculative Investment?

If you’ve ever watched The show “Mad Money” on CNBC, you may have heard the term “spec”, which is short for speculative investing.

A speculative investment is when you buy shares in company that is unproven, which makes its future uncertain.

A good example would be a developmental biotechnology company.  Most speculative biotech companies’ fortunes depend on their ability to create a drug that can successfully treat a disease.  If their clinical trials show results, they may receive FDA approval to commercialize their drug.  However, the odds of FDA approval for most drugs are low, so these investments come with a great deal of risk.

I think every investor should have at least one spec in their portfolio.  Just make sure you don’t overload your portfolio with them.

*The Stock Market is For Everyone, Eric Milton’s short guide to stock market investing for beginners, is available in e-book and paperback formats.  If you like what you see on this blog, we hope you’ll take a moment to purchase and read the book, let us know what you think via a blog comment or Amazon review, and share this information with others!  Thank you.*

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