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.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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