What is the difference between "investment" and "speculation"?

Speculation is to aim at an opportunity and hope to make a big profit, while investment is to make you towards your final dream step by step.

If you have two choices:

1、 You can get 1 million dollars for sure;

2、 There are 10 million dollars, but you have to flip a coin. If you lose, you will get nothing. Which one do you choose?

Almost everyone chose the first one and take 1 million dollars directly.

Think carefully, the value of the first option is 1 million, while the second option, 50% probability multiplied by 10 million is actually worth 5 million.

Why people don’t choose the second choice? The reason is very simple, because we all know that there are uncertainty and risks.

If we have the third option, we will split the 10 million of the second option into 10 times. We will bet 1 million each time. If we win, we will take 1 million. If we lose, we will have another round. It is estimated that everyone will choose this scheme. Because there are ten chances, the win or loss is almost 50%, and the maximum probability is 5 million.

Isn't this diversification and long-term investment? We don't have to gamble once. As long as the risks are spread out, things become certain. Every investment has risks, but it is profitable in aggregate.

The mentality of speculation and investment is how many assets you dare to invest.

For example, if you have 1 million, how much do you dare to invest in the market?

If you take 10 dollars to buy lottery tickets, it is obviously speculation. When you buy stocks with only 500 dollars, it is actually speculation.If you lose, you will be depressed. But it will not change your life. But if you are asked to invest 5000 dollars or more, you have to think about it carefully. We should consider income, risk, liquidity, etc. The mentality at this time is the mentality facing investment. In other words, you can measure whether you are speculating or investing by the percentage of assets you dare to invest in the market.

In terms of investment or financial management, the first thing to manage is idle money, especially the money you put in the bank deposit. What retail investors need to consider is to take certain risks, diversify long-term investment, and mobilize the money to obtain profits.

Only when we consider it from the perspective of individual and family total assets can we enter into the orbit of investment.

No matter whether the other people show you a high or low yield, as long as he has his own logic, he is a smart person.

When we spend a large amount of idle money, it is an investment. A good expert must not take a risk for once, but can eliminate the risk and get the certainty behind it even if the single profit is not very high.

（Writer：Seli）