Speculative Investing vs. Non-Speculative Investing

Investments can generally be sorted into two categories: speculative and non-speculative. In this blog, we’ll take a deeper dive into the differences between these two types of investment strategies and why you might choose one over the other so that you can make an informed decision about what’s right for you.

What is a speculative investment?

Speculative investments are investments that carry a significant amount of risk. Usually part of a short-term strategy, the objective is to sell the investment for profit. Since these types of investments are more of a gamble, there is a high potential that the investor may lose their initial investment altogether.

These investments can take many forms, but generally, any time you are considering investing in something with the expectation that its value will increase within a short timeframe and you’ll be able to sell it for more than you bought it for, you’re making a speculative investment. These are investments that do not have any real production occurring. This is the agreement, by people, of whether something is considered valuable or not. Gold is agreed upon to be valuable, but it in itself is producing nothing.

Non-productive assets include precious metals, commodities, art, and collectibles. They do not create any income for you during the period you own them. You speculate that the next buyer will want to pay more for it than you did.

Let’s compare this to the latter investment type.

Non-Speculative Investment

A non-speculative investment is an investment that made with the intent that it will provide stable, continuous income for the investor while they hold onto it. These types of investments are typically part of a long-term strategy as they deliver more modest returns that add up over time. It is a productive asset, which is something that produces income for you while you own it. In turn, you do not need to sell it for it to be a great investment. 

Real Estate, farming, and owning a portion of a business are some kinds of non-speculative investments. These are entities that are producing some sort of product or service, that others then exchange money for. The best types of non-speculative investments are the ones that people will find to be valuable for a long period of time. A new business may be something that will be around for a long period of time, or it may not. That is why many investors stick with acquiring large amounts of properties – there will always be a need for housing. 

Pros and Cons of Speculative and Non-Speculative Investments

Making a choice between speculative and non-speculative investing strategies largely comes down whether or not you want consistent cash flow for the duration of you owning the investment. Speculative investments have the potential to be very lucrative for the investor, but if things don’t pan out, you could lose your entire investment.

On the other hand, while non-speculative investments tend to produce more modest returns for the investor, you’re unlikely to end up with a total loss. And, the more non-speculative investments you own, the more consistent cash is produced for you. 

For most investors, it makes sense to have a diversified investment portfolio. This refers not only to the types of investments you make, but also the investment strategies you utilize. Having non-speculative investments that produce consistent results for you provides a great, stable foundation that enables you to make other investments you would like to have.

At Equity & Help, we specialize in helping our real estate philanthroinvestors® grow their wealth through real estate investing. Our program fits squarely into the non-speculative investment category as we are focused on providing stable and consistent returns for the investor. On average, our investors consistently earn 12%+ returns on their investments with us!  

If you would like to learn more about our program, give us a call. We’ll be happy to provide you with more information on what we do and how we’ve achieved real results for investors like you.

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