Before presenting the key difference among investment, speculation and gambling, lets explain these concepts in brief.
Investment
Dictionary meaning of investment is to devote, give or use of time, talent, knowledge, income, etc. for the purpose of receiving something big in the future. It means that investment refers to the scarification of present income so as to achieve higher income in the future. It is the purchase of real assets (Gold, land, etc.) or financial assets (stocks, bods, debentures, etc.) for the expectation that it will provide higher return in the future period of time either through the current income (interest, dividend, profits, etc.) or through the capital appreciation.
Speculation
Speculation refers to the short-term commitment of fund to make highest profit. Its intention is only to earn more profit in short period of time. The person involve in the speculation is known as speculator. Like investor the speculator does not analyze the risk and return while purchasing the real or financial assets. The speculator only focuses on the return. While making investment, investor carefully done analysis of all the available information, markets, and industry where as speculator make decision only with limited information.
For example, one of your friend told you that the value of a bitcoin is $4600 and raising day by day and will reach to $10000 in few months. If you buy some bitcoin only with this limited information, then it is said to be speculation. Here your decision is based on the limited information provided by your friend which may or may not true. And other point is that you didn’t analyze the risk you just buy the bitcoin with the expectation of earning more profit in short time.
Gambling
Gambling refers to the activity or practice of playing a game of chance for money or other stakes. For example, if you spend some money to buy a lottery tickets then it will be gambling. Here your chance of winning is uncertain. Gambling is for very short period of time. In gambling the profit is very high but the chance of winning is very low. The main objective of gambling is entertainment you. Making profit is secondary objective.
Key differences and similarities among Investment, Speculation and Gambling
Some of the main differences among Investment, speculation and gambling are given in the table below:
| Basis of difference | Investment | Speculation | Gambling |
| Meaning | Investment refers to the commitment of fund for long period of time in the real or fixed assets for the expectation of receiving higher income in the future. | Speculation, on the other hand, refers to the commitment of fund for the expectation of gaining higher profit in the short time. | Gambling refers to the practice of investing money in the game of chance for the objective of getting very high profit in very short time period. |
| Objective | Income and capital appreciation is the main objectives of the investment. | The main objective of speculation is to earn more profit in short period of time. | The primary objective of gambling is entertainment. Earning profit is secondary objective. |
| Analysis of Risk and Return | While investing fund for long time period, risk and returns of the available alternatives are carefully analyzed by considering fundamentals factors. | In speculation, speculator does not analyze the risk and return while investing fund. He make decision by considering the rumor, inside information and market behaviour. | Gambler also does not analyze the risk and return. |
| Return | There is moderate return in investment. | High return. | Very high return. |
| Risk | Investment create lower risk for the investor because before making investment investor carefully analyzed all the available alternatives in terms of risk and returns. | High risk due to the availability of limited information and non-analysis of risk and return. | Very high-risk due to the uncertainty of winning. |
| Time horizon | Investment is done for long time period. | Speculator invests his fund for short time period especially for a few months. | Very Short Period. |
| Use of funds | Own fund is used. | Own or borrowed fund is used. | Own fund is used. |