Are You Investing or Speculating?
Here's how to tell the difference ... and when it's actually OK to speculate in the stock market.


Do you feel hesitant to put more of your money in the market because it feels like a gamble? Even seasoned investors can get nervous about investing their hard-earned money, because all investments come with risk.
And for most people, the thought of losing the money you worked hard to earn is far more painful than the chance of possibly earning more.
But here’s the thing: If you’re investing wisely, you can mitigate your risks through the right strategies, like appropriate asset allocation and diversification. You still risk experiencing temporary losses, but it’s not the same as taking your cash to the blackjack table.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Some people, though, treat investing that way. They throw money into the market without a plan, without a strategy, and without the proper safeguards in place to protect against unnecessary risks.
In other words, they don’t invest at all. They speculate, and they often experience wild swings and major losses in their portfolios as a result.
What Are You Doing with Your Wealth?
Benjamin Graham wrote about how to identify a speculator in his great investment book, The Intelligent Investor. He explained that “the speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices.”
Graham goes on to write that investors do care about market movements — but only from a practical standpoint, not because they get emotionally involved with volatility. Movements in a market, said Graham, “alternately create low price levels, at which [the investor] would be wise to buy, and high price levels, at which [the investor] certainly should refrain from buying and probably would be wise to sell.”
Based on this definition, “investors” are not just individuals who put money into the market. Investors are people who purposefully, strategically and rationally buy and sell securities. Speculators, on the other hand? Those are individuals who also buy and sell in the market — but they do so emotionally and without a strategy.
So, on which side of the spectrum do you fall? Are you investing or speculating?
If you’re unsure, consider this list of activities and behaviors. If you’re checking the boxes here, you might be speculating:
- You think about the short term. You’re trying to earn a big return in a short amount of time. Rather than planning to invest over years or decades, you want to see a return within months, weeks or even days.
- You act based on hunches, guesses or tips. No one knows what the market is going to do tomorrow (let alone any one individual security in that market). If you base your investments off of predictions, forecasts or what someone else told you was going to happen… that’s speculating, not investing. And yes, this holds true even if the hunch came from a so-called “expert” on a financial TV program!
- You let your emotions get the best of you. Humans are highly emotional, irrational decision-makers. There’s nothing we can do to change that -- but we can plan for it by putting an investment strategy in place and then sticking to that strategy. If you abandon your plan in favor of your feelings, you’re probably speculating.
- You think you know more than the market. An efficient financial market means that the securities within that market are accurately priced. But speculators think they have some sort of information the rest of the market doesn’t have -- and they try to use that information to find mispriced securities. If you think you know more than the millions of other market participants and all the data that flows in and out of that market to determine individual prices … A. you’re probably wrong, and B. you’re speculating.
If You Are Speculating… That Might Be Just Fine
Here’s the thing: If you realize you’re speculating instead of investing, that might be OK in some circumstances. Speculating isn’t inherently bad, but people run into problems when they leverage all their available wealth to do so or fail to realize they’re not investing.
If you use 95% of your available funds to invest wisely, you’re on track to meet all your financial goals, and you have the risk capacity (and tolerance) to be OK losing a small amount of cash on a speculative investment. It might be OK to take 5% of your available funds and go play.
The key is to understand you’re doing just that: playing around, or making a gamble, or speculating. If you have the money available, feel free to speculate on the side — and make a distinction between that activity and your strategic investment plans.
Of course, some people do not have the capacity to speculate with any amount of their money. A good financial planner can help you determine what’s appropriate for your situation and provide an objective, third-party opinion on how much cash you can safely use to speculate with stocks, businesses or other vehicles like cryptocurrencies.
Your advisor might also be able to serve as the voice of reason needed to say, “OK, you’ve made a great return with your speculative investment — now, it’s time to sell.” Even when you’re exploring the possibilities with a small, safe amount of your wealth, it’s helpful to have a logical voice on your shoulder to help you make the most of both your strategic investments and your more speculative ventures.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.
-
How to Shop Smarter as Tariffs Drive Up Prices in 2025
Tariff fatigue is real. Here’s how to save as prices rise and uncertainty grows.
-
Retirement Reimagined: Finding Your Tribe in LGBTQ-Focused Communities
Demand for LGBTQ retirement communities in the U.S. is high, but inventory is not easy to find. Here are some safe havens to explore.
-
The $1 Million Retirement Question: Are You Being Tax-Smart About Your Pension?
A financial planner raises some key considerations for navigating retirement with a pension and recommends four strategies.
-
The Costly Mistake You Might Be Making With Your First 401(k)
Most people start contributing to their retirement savings later in life. That could be a big-time mistake, literally costing you thousands of dollars.
-
An Estate Planning Attorney's Guide to the Importance of POAs
Regularly updating your financial and health care power of attorney documents ensures they reflect your current intentions and circumstances. It's also important to clearly communicate your wishes to your chosen agents.
-
Divorce and Your Home: An Expert's Guide to Avoiding a Tax Bomb
Your home is probably your biggest asset, so if you're getting a divorce, the stakes are high. Keep it? Sell it? You need to have a good plan in place for how to handle it.
-
Fewer Agents, Fewer Audits: How IRS Staff Cuts Are Changing Enforcement
Significant reductions in the IRS workforce appear to be increasing the number of 'no change' audit closures. The shift could potentially increase the overall tax gap — the difference between taxes that should have been paid and those that were.
-
What if You Could Increase Your Retirement Income by 50% to 75%? Here's How
Combining IRA investments, lifetime income annuities and a HECM into one plan could significantly increase your retirement income and liquid savings compared to traditional planning.
-
Here's Why You Shouldn't Do an Estate Plan Without a Financial Planner
Estate planning isn't just about distributing assets. Working with a financial adviser can ensure you've considered the big picture — and the finer details.
-
Trump Tariffs and Taxes: Waiting to See What Happens Is Not a Strategy
Like presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle. If you're paralyzed by uncertainty, you could be missing opportunities to benefit your financial future.