A speculative stock is a stock that a trader uses to speculate. The fundamentals of the stock do not show an apparent strength or sustainable business model, leading it to be viewed as very risky and trade at a comparatively low price, although the trader is hopeful that this will one day change. This may be a penny stock or an emerging market stock that the trader expects to become much better known very soon.
Many traders are drawn to speculative stocks due to their higher volatility relative to blue-chip stocks, which creates an opportunity to generate greater returns—albeit at greater risk. Most long-term investors and institutional investors stay away from speculative stocks unless they are part of a mutual fund or exchange traded fund [ETF].
- Traders interested in speculative stocks seek out securities that might seem risky at the moment but appear to have great potential that is not yet realized.
- Such stocks are the subject of speculation and are thus referred to as speculative stocks.
- Speculative stocks are high-risk, high-reward, and tend to appeal to short-term traders.
- Speculative stocks tend to be clustered into sectors or types: penny stocks, emerging market stocks, rare materials stocks, pharmaceutical stocks, etc.
Speculative stocks appeal to short-term traders due to their low share price and greater volatility compared to traditional blue-chip stocks. The greater volatility enables traders to realize windfall profits if the trade works out in their favor. The challenge is to find ways to limit losses if the trade does not work out.
Oftentimes, speculative stocks are clustered in sectors such as mining, energy, technology, and biotechnology. While there is significant risk involved in investing in early-stage companies in these sectors, the possibility that a small company may find a giant mineral deposit, invent the next big app, or discover a cure for a disease offers enough incentive for speculators to take a chance on them.
Although most speculative stocks tend to be early-stage companies, a blue-chip can occasionally become a speculative stock if it falls upon hard times and has rapidly deteriorating prospects for the future. Such a stock is known as a fallen angel and may offer an attractive risk-reward payoff if it can manage to turn its business around and avoid bankruptcy.
Speculative stocks generally outperform in very strong bull markets when investors have abundant risk tolerance. They underperform in bear markets because investors’ risk aversion causes them to gravitate toward larger-cap stocks that are more stable.
Typical valuation metrics such as the price-earnings [P/E] and price-sales [P/S] ratios cannot be used for most speculative stocks since they are generally unprofitable and may have minimal sales. For such stocks, alternative techniques such as the discounted cash flow [DCF] valuation or peer valuation may need to be used to account for future potential rather than current fundamentals.
Speculative stocks often account for a small portion of portfolios held by experienced investors because such stocks may improve the return prospects for the overall portfolio without adding too much risk, thanks to the beneficial effects of diversification. Experienced investors who dabble in speculative stocks typically look for companies that have good management teams, strong balance sheets, and excellent long-term business prospects.
Most investors should avoid speculative stocks unless they have the time to dedicate to research. Meanwhile, traders who choose to trade speculative stocks should be sure to use risk management techniques to avoid sharp declines. This is especially true during a recession when investors often pull their money from speculative stocks and seek safe-haven investments. A better strategy during more turbulent times is to invest in companies with low debt, good cash flow, and strong balance sheets.
A trader who invests primarily in risky stocks is known as a speculator.
Investors and traders necessarily take on calculated risk as they attempt to profit from transactions they make in the markets. The level of risk undertaken in the transactions is the main difference between investing and speculating.
Whenever a person spends money with the expectation that the endeavor will return a profit, they are investing. In this scenario, a reasonable judgment is made after a thorough investigation that the endeavor has a good probability of success.
But what if the same person spends money on an undertaking that shows a high probability of failure? In this case, they are speculating. Success or failure depends primarily on chance, or on uncontrollable [external] forces or events.
The primary difference between investing and speculating is the amount of risk undertaken. High-risk speculation is typically akin to gambling, whereas lower-risk investing uses a basis of fundamentals and analysis.
Dưới đây là những mẫu câu có chứa từ "stock market", trong bộ từ điển Từ điển Tiếng Anh. Chúng ta có thể tham khảo những mẫu câu này để đặt câu trong tình huống cần đặt câu với từ stock market, hoặc tham khảo ngữ cảnh sử dụng từ stock market trong bộ từ điển Từ điển Tiếng Anh
1. Some stock market thing.
2. Basics of Stock Market
3. The stock market brisked up.
4. Stock market has endogenesis frangibility.
5. Stop playing the stock market.
6. The most ultimate problem on constructing a harmonious stock market is the circumscription of harmonious stock market.
7. The stock market is very active.
8. The stock market will soon rally.
9. Prices fell on the stock market.
10. They dabble in the stock market.
11. I crashed the stock market yesterday.
12. When the U.S. stock market collapsed in October 19 the Japanese stock market was the most resilient.
13. It can happen in the stock market.
14. Even the stock market is becoming skeptical.
15. He plays the horses/the stock market.
16. She shrewdly predicted the stock market crash.
17. The stock market supplemented his regular income.
18. The fluky stock market makes shareholders nervous.
19. Conditions on the stock-market were unsettled.
20. I am not quite into stock market.
21. The stock market floor was wildly busy.
22. He floated his firm on the stock market.
23. He made a fortune on the stock market.
24. 22 She shrewdly predicted the stock market crash.
25. 7 Stock market shares resemble a alphabet soup.
26. It is difficult to forecast stock market trends.
27. She made a fortune on the stock market.
28. Many investors overreacted to the stock market crash.
29. The stock market is soaring to new heights.
30. 19 The stock market floor was wildly busy.
31. He likes to speculate on the stock market.
32. He exhausted a fortune in stock-market speculation.
33. She's made a killing on the stock market.
34. The company is overvalued on the stock market.
35. Investor sentiment is a contrarian stock market indicator.
36. Recent stock market losses point to trouble ahead .
37. The stock trader carefully monitored the stock market.
38. I lost my shirt in the stock market.
39. She made a killing on the stock market.
40. Is It Wise to Invest in the Stock Market?
41. The stock market crash might lead to financial meltdown.
42. Experts have forecast an upturn in the stock market.
43. The stock market sees out 1989 in fine style.
44. Prices continued to fall on the stock market today.
45. 4 State shares are not tradable in stock market.
46. The Tokyo stock market rallied later in the day.
47. The stock market index, meanwhile, has risen 8 percent.
48. The global stock market is worth 55 trillion dollars.
49. The news gave the stock market a big fillip.
50. 13 Our stock market indicators are currently "overall" bearish .