Editing Speculation (section)

== Speculation vs. investment ==

The view of what distinguishes [[investment]] from speculation and speculation from excessive speculation varies widely among pundits, legislators and academics. Some sources note that speculation is simply a higher-risk form of investment. Others define speculation more narrowly as positions not characterized as hedging.<ref name=Szado>{{cite journal |title=Defining Speculation: The First Step toward a Rational Dialogue |last=Szado |first=Edward |year=2011 | journal=The Journal of Alternative Investments |volume=14 |pages=75–82 |publisher=CAIA Association|doi=10.3905/jai.2011.14.1.075 |s2cid=154097642 }}</ref> The [[U.S. Commodity Futures Trading Commission]] defines a speculator as "a trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements".<ref name=CFTC>{{cite web |url=http://www.cftc.gov/consumerprotection/educationcenter/cftcglossary/glossary_s |title=CFTC Glossary: A guide to the language of the futures industry |work=cftc.gov |publisher=Commodity Futures Trading Commission |access-date=28 August 2012 |archive-date=18 August 2012 |archive-url=https://web.archive.org/web/20120818123029/http://www.cftc.gov/consumerprotection/educationcenter/cftcglossary/glossary_s |url-status=dead }}</ref> The agency emphasizes that speculators serve important market functions, but defines excessive speculation as harmful to the proper functioning of futures markets.<ref name=Staffreport>{{cite web |url=http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/cftcstaffreportonswapdealers09.pdf |title=Staff Report on Commodity Swap Dealers & Index Traders with Commission Recommendations |year=2008 |publisher=U.S. Commodity Futures Trading Commission |access-date=27 August 2012}}</ref>

According to [[Benjamin Graham]] in ''[[The Intelligent Investor]]'', the prototypical defensive investor is "one interested chiefly in safety plus freedom from bother". He adds that "some speculation is necessary and unavoidable, for, in many common-stock situations, there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone." Thus, many long-term investors, even those who buy and hold for decades, may be classified as speculators, excepting only the rare few who are primarily motivated by income or safety of principal and not eventually selling at a profit.<ref>Graham, Benjamin (1973). ''The Intelligent Investor''. HarperCollins Books. {{ISBN|0-06-055566-1}}.</ref>