What is the definition of a speculator with regard to investing?
An investor is buying a share of a company. They expect the company to earn money in which they “share” either in dividends or stock value, over time. A speculator is someone that thinks the stock is underpriced today and they can sell it for more tomorrow, or shortly after. One is buying the earnings future of the company, the other is trading on the current price of the stock. I have said it is the difference between being General Motors or being a used car saleman. You might think of it in terms of housing. A real estate investor will buy a home, rent it for years pocketing the rent and hopes to sell it for more down the line. The speculator is a flipper that thinks they are buying cheap and want to put a coat of paint on it and sell it for more within a month.
compare a speculator to a arbirtrageur, who tries to make an almost certain profit between two highly correlated securities, betting the price of the two will come back in line to their appropriate ratios. a speculator, on the other hand, takes much more risk, and his or her analysis is based on what he or she thinks will happen, which is much less certain than what an arbitrageur does.
