Investing is NOT Speculation

There is a difference between speculation and investing.  

One distinction defined this by the length of time over which the investor expects to realise their investment; or to put it another way, how quickly one expects to make money.  

Speculation is high-risk-get-rich-quick territory.

Investing is managed risk over long periods of time where you can acquire wealth slowly.  

[  I am an investor by nature, not a speculator.
I am in it for the long haul, and having bought many good shares at fair or bargain prices in the past and presently, I intend to hang onto to them.
My view is that they will move yet higher over time.
Sometimes, the massive and largely unprecedented increase in the share price of my stocks over a short period was not anticipated by me or probably by many others.
So, did I get lucky?  Well, yes and no.
It was my view that the share price of these companies would rise further or eventually recover from recent corrections, whilst the past is no way of accurately predicting the future, I felt that it would rise to around a certain price in the medium term.
The difference between my expectations and what happened is that I would have been happy for it to return to that price within five years.  As it happened, it did so in less than a few months.  ]

Equity Investments - Analyzing a Company - Types of Stock

1. Growth Company and Growth StockA growth company is a company that consistently grows by investing in projects that will generate growth. A growth stock, however, is a stock that earns a higher rate of return over stocks with a similar risk profile.
   
   Feasibly, a company could be a growth company, but its stock could be a value stock if it is trading below its peers of similar risk.

2. Defensive Company and Defensive StockA defensive company is a company whose earnings are relatively unaffected in a business cycle downturn. A defensive company is typically reflective of products that we "need" versus "want". A food company, such as Kellogg, is considered a defensive company. A defensive stock, however, will hold its value relatively well in a business cycle downturn.

3. Cyclical Company and Cyclical StockA cyclical company is a company whose earnings are affected relative to a business cycle. A cyclical company is typically reflects products we "want". A retail store, such as The Gap, is considered a cyclical company. A cyclical stock, however, will move with the market in relation to the business cycle.

4. Speculative Company and Speculative Stock.A speculative company is a company that invests in a business with an uncertain outcome. An oil exploration company is an example of a speculative company. A speculative stock, however, is a stock that has potential for a large return, as well as the potential for considerable losses. An example of speculative stocks can be found in the tech bubble, where investors put money into speculative stocks, but the investor could have been hurt financially or made large gains depending on the stock the investor invested in.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/equity-investments/analyzing-companies-stock-types.asp#ixzz1yf8SKSRC

Speculative-Growth Stocks - Introduction

Speculative-growth stocks can inspire dreams of wealth - and nightmares of poverty.

These companies are often new ventures selling something people want, generating rapid revenue growth, but incurring high expenses as they strive to become a permanent fixture of the corporate landscape.

One might be the next Microsoft MSFT.  Or the next Atari.

Their defining characteristics are rapid revenue growth but slower or spotty earnings growth - strong sales, in other words, but a lagging bottom line.

In fact, many speculative growth companies lose money - lots of it.  That's not much inducement to invest.

Still, corporate America's future heavyweights and best investments may lurk in this high-risk, high-reward corner of the market.

It's possible to curb some of the risk, too.

For example, Yahoo YHOO, the World Wide Web portal was one of the hottest Internet stocks of the 1990s.

The buy/sell ratio in Lloyds Banking Group was 7:1 on Friday

Private investors pile into Lloyds shares
Private investors who bought shares in Lloyds Banking Group outnumbered sellers by seven to one at one London stockbroker as the shares plunged following news of huge losses at HBOS.

By Richard Evans
Last Updated: 6:11PM GMT 16 Feb 2009

"The buy/sell ratio in Lloyds Banking Group was 7:1 on Friday," said TD Waterhouse, a broker that specialises in "execution only" trades – those where investors make their own decisions.

Strong demand for the bank's shares continued on Monday – the ratio was two to one in favour of buyers, after Lloyds shares fell by 20pc on the opening of the market in London. By midafternoon, the shares were trading at 57p.

Investor interest was first triggered on Friday when Lloyds' share price fell by 32pc, closing at 61.4p as institutional investors sold the shares following news of losses of almost £11bn at HBOS, the troubled bank that Lloyds bought last year.

TD Waterhouse said: "Lloyds Banking Group accounted for 40pc of the top 10 trades by our customers on Friday. On Monday Lloyds again was the most traded stock."

It added: "The data indicates that our frequent traders are looking to turn a quick profit on the volatility of banking stocks, and Lloyds in particular."

Tom Diavolitsis, a director of TD Waterhouse, said: "Lloyds was the number one traded stock by our customers on Friday last week and in the first two hours of trading today [Monday].

"It is clear that our investors are hoping to take advantage of the recent volatility in the Lloyds share price. Some will be looking to make a short-term profit, others may be looking to gain by holding the stock for the longer term."

It was a similar story at Stocktrade, the execution-only division of Brewin Dolphin, another stockbroker. Lloyds accounted for 25pc of the division's trades on Monday morning; 56pc of the Lloyds orders were buys and 44pc were sells.

Royal Bank of Scotland accounted for 7pc of trades – 63pc of them buys and 37pc sells. Buy orders for Barclays shares outnumbered sales by three to one.

Brewin Dolphin said its view for investment management clients was that the Government would nationalise Lloyds only as a very last resort. "We are not that close to a last-ditch scenario just yet, though very much aware of the strong economic head winds.

"The current Lloyds share price is acting like a warrant; if they can survive we believe there is significant longer-term upside."

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/4640868/Private-investors-pile-into-Lloyds-shares.html

Stock Market Classification of Equity Shares

Stock market classification of Equity Shares

Blue chip shares: Shares of large, well-established, and financially strong companies with an impressive record of earnings and dividends.

Growth shares: Shares of companies that have a fairly entrenched position in a growing market and which enjoy an above average rate of growth as well as profitability.

Income shares: Shares of companies that have fairly stable operations, relatively limited growth opportunities, and high dividend payout ratios.

Cyclical shares: Shares of companies that have a pronounced cyclicality in their operations.

Defensive shares: Shares of companies that are relatively unaffected by the ups and downs in general business conditions.

Speculative shares: Shares that tend to fluctute wdely because there is a lot of speculative trading in them.

Note that the above classification is only indicative. It should not be regarded as rigid and straightjacketed. Often you can't pigeonhole a share exclusively in a single category. In fact, many shares may fall into two (or even more) categories.