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Rekenthaler Report

When Does Investing Become Speculation?

When the expected return is not clearly positive.

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Last week, The Wall Street Journal documented how cryptocurrency owners were defrauded of $4 billion in 2019. My initial reaction was, “Well, that’s what they get for speculating.” My second thought was to retract the first, because my criticism had begged the question. What, exactly, is “speculation”? 

Some sources treat all investments as speculation. For example, Cambridge Dictionary defines speculation as “buying something hoping that its value will increase and then selling at this higher price in order to make a profit.” By that measure, buying Treasury bills is speculative. That uses the term so broadly as to deplete its meaning. 

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