The Difference Between Speculating and Investing

January 14, 2021

November 12, 2021

There is nothing wrong with wanting to make as much money as possible from your investments, but you need to balance your desire to earn with the risk you’re willing to take. You wouldn’t take all your retirement savings to Las Vegas and bet it all on one hand of blackjack because it would be too risky. By the same token, you wouldn’t stick your cash in a piggy bank and stuff it under your bed because that doesn’t offer any reward at all.

The balance between risk and reward in your investment portfolio comes down to understanding the differences between speculating and investing, and the relationship between the two strategies.

Understanding the Difference Between Speculating and Investing


Speculating refers to the process of investing in high-risk, high-reward opportunities. During the 1848 gold rush in the U.S., those who left their homes and risked it all to find gold out west were known as speculators. In today’s world, speculating can involve investing in things like futures, currency trading, options, cryptocurrency, and buying riskier stocks.

Speculating itself isn’t necessarily a bad thing, but it depends on how much you risk. Even Mr. Wonderful himself, Beanstox Chairman and co-owner Kevin O’Leary, has said many times that Shark Tank investments are but a small portion of his total investment portfolio. The key is to understand that speculating can be very volatile and involves a lot of risk. If you’re trying to limit risk, avoid speculating.


Investing involves putting your money into owning assets expected to bring in a return, usually with an average amount of risk. Typical investments include stocks, real estate, or other assets and are expected to appreciate over time. It doesn’t mean you’re giving up all hope and chances of earning a return, but it takes a much healthier approach to the risk vs. reward equation.

Technically, speculating is a form of investing. However, when the two topics are discussed together, investing refers to lower-risk, lower-reward opportunities like purchasing a home, investing in bonds, buying established stocks, and putting money into certain retirement funds.

Incorporating Both into Your Investment Plan

A term you’ll hear a lot in the investment and banking world is “balance.” A balanced portfolio is a collection of investments that have a strong foundation of stable investments and a few speculative investments that offer opportunities for bigger returns.

When it comes to your investment portfolio, it should be balanced as well. Where you are in your life and how much risk you can afford to take on dictates what the balance between sound investments and speculative investments should look like. For example, the closer you are to retirement, the less speculative chances you should be taking. Why? You have less time to recover from a major setback before you need to start using your saved retirement money. If someone in their 20s loses on a riskier investment, they are more likely in a better position to recover from that loss.

What should you do if you’re not sure how to balance your portfolio or how much risk to take on? You may want to consider using a professional service to help. Apps like Beanstox rely on investment professionals to create personalized ETF portfolios with different levels of risk considered. By answering a few questions, including your age, time horizon, and risk tolerance level, Beanstox recommends a mix of investments appropriate for your goals. It’s that simple.

The Bottom Line

Hopefully, you’ve got a plan in place to save for your future and retirement, or you’re at least in the process of creating one. Understanding the relationship between investing and speculating is a key first step toward building a portfolio with the right balance of risk and reward.

Related Articles

7 Tips for Saving Through the Holidays

7 Tips for Saving Through the Holidays

No matter how you celebrate, the holidays are a time for gathering with family, reflecting on all the things we have to be grateful for, and shelling out money on a mountain of gifts.

What Makes Beanstox Different?

What Makes Beanstox Different?

What makes Beanstox different is how we invest for our clients. The Beanstox app provides personalized portfolios with ETFs that may hold hundreds of stocks and bonds with an emphasis on U.S. stocks, dividends, growth, and technology.

Learn     News     Help Center

Beanstox Inc. (“Beanstox”) is an SEC registered investment adviser and has arranged for brokerage services to be provided by DriveWealth LLC., a registered broker-dealer and member of FINRA/SIPC. DriveWealth is not affiliated with Beanstox.

Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and risk tolerance levels and Beanstox’s charges and expenses. The information provided herein is for illustrative purposes only and does not constitute personalized investment advice, recommendations or solicitations to hold, buy or sell any investment or security of any kind. Beanstox’s internet-based advisory services are designed to assist clients in achieving investment goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form ADV Part 2A and Part 3 CRS and other disclosures.

All images and return figures shown are for illustrative purposes only and are not actual customer or model returns. Actual returns will vary greatly and depend on personal and market conditions. Past performance does not guarantee future results. Google Play and the Google Play logo are trademarks of Google, Inc. Apple, the Apple logo, and iPhone are trademarks of Apple, Inc., registered in the U.S.

Our site uses cookies and other similar technologies so that we can remember you and understand how you and other visitors use our site. Please see Beanstox Privacy Policy for more information.

© 2022 Beanstox Inc.