Speculative Investment: how to start investing
Published: April 6, 2021 by Andrew
The desire to get rich is very common and some people try to satisfy this desire by looking for so-called Speculative Investment.
Unlike classic investments, speculative ones are aimed at obtaining a relatively quick return against an increase in risk.
There are a multitude of speculative investments on the market and in this guide we will try to guide you among the most used by professional traders, by analyzing:
- The amount of money needed to invest
- The potential economic return
- The risk associated with the investment
In addition, we will also address the variable Broker, or the intermediary suitable for such investments, offering you some of the best CFD brokers such as eToro.
In the list below you can see the best online trading platforms on the market, which allow you to trade without commissions:
Min. Deposit: 200€
Min. Deposit: 400€
Min. Deposit: 10€
Min. Deposit: 250€
Min. Deposit: 100€
Min. Deposit: 250€
Speculative Investment: meaning
Speculative investments differ from “simple” investments for the risk of the investment itself and for the potential economic return, usually very attractive for traders.
In fact, in speculation the risk of loss is more than offset by a high possibility of earning.
Speculative investments usually have a shorter duration than traditional ones and are more linked to price fluctuations on the main markets: Equities, Forex, Commodities, Cryptocurrencies, etc.
In Forex for example, if a trader buys foreign currency he does a currency speculation and usually tries to buy at a low price and waits for a higher price to resell.
When making high-yield investments, you are looking for noteworthy profits and technically speculation differs from simple investment for 3 factors:
- The expectation of economic return
- The duration of the investment
- The financial leverage used
While the first two are only estimable, leverage is a multiplier that can be chosen before investing and is decided by the trader.
This “multiplier” allows you to invest lower amounts and take advantage of leverage to obtain greater gains, but also exposes you to greater risks.
In Europe, the maximum leverage that can be used by brokers is 1:30, a limit imposed by ESMA in 2018.
How to do a Speculative Investment
To make speculative investments you usually need an intermediary between you and the market and this intermediary is usually a broker or a bank.
Speculative investments can be made using two types of intermediaries:
- Traditional Brokers
- CFD Brokers
The first choice includes for example your bank and is a rather expensive method of investing and requires good financial availability.
Traditional brokers need to open a securities account to make investments, it will be mandatory to pay stamp duty and commissions for each operation performed.
Since many trades are usually made in high-yield investments, these fees can greatly affect the return on investments made.
The second option, the one offered by CFD Brokers allows you to make speculative investments without opening a securities account, without paying stamp duty and without paying commissions.
With these brokers you can make high-yield investments in many markets: Stocks, Indices, ETFs, Forex, Commodities, Cryptocurrencies, etc.
Furthermore, these brokers, which offer Contracts for Difference (CFDs), allow you to aim both upwards and downwards, earning (if the forecast is right) in all market conditions.
Where to do Speculative Investment
To choose where to make speculative investments, we first recommend that you only evaluate Brokers in possession of a regular license, better if issued by an undoubtedly authoritative body such as our CONSOB or CySEC.
This license will protect you from scams, which are very common on the web.
The intermediaries that we have listed at the beginning of our guide are all safe, reliable and in possession of a regular license, you can choose freely.
The differences between brokers concern the trading platform, the services offered, assistance, etc.
Below you will find brief descriptions of what we believe are the best online brokers for speculative investments: eToro, ForexTB and Trade.com.
eToro is the online broker that most embodies the intermediary for speculative investments: it is safe, reliable and offers one of the most intuitive trading platforms on the market.
Its safety is confirmed by numerous authorizations, among which we must mention the CONSOB license for Europe.
How do you make speculative investments with eToro?
- Register for free on eToro
- Log into your Demo or real account (by depositing at least € 200)
- Select the CFD of the stock you are interested in and click on “Trade”
- Decide whether to buy or sell the stock and how much to bet in the operation
If you are not very familiar with trading platforms you can delegate your high yield investments to more experienced traders.
How you do it? Taking advantage of eToro’s famous Copy Trading, an automatic investment system that allows you to copy the market operations of the best traders in the world (on eToro) and do so automatically.
You choose the traders you want to copy and Copy Trading will automatically replicate their trades on your account.
Thanks to Copy Trading you can get the same returns as the more experienced traders you are copying, all without “lifting a finger”.
Here are some of these traders taken for example from the “People” area of eToro:
Click here and choose which trader to copy
ForexTB has achieved great popularity among traders, first of all for its very complete offer and then for the attention it places on the training of its members.
Security is certified by the CySEC license in its possession and the training we have mentioned finds its maximum expression in a Trading Course that this Broker has developed.
The course is in ebook format and describes in detail how online trading works and how you can make speculative investments with profit.
It is a free pdf and can be downloaded directly from the link below:Click here and download the Trading Course for free
The offer of this Broker includes two platforms, free and very complete:
- Metatrader is a very professional platform, complete and full of indicators of all kinds.
- The Web Platform is simple, intuitive, fast and accessible from any device, without installing anything.
To make speculative investments on ForexTB you must follow these 4 steps:
- Register on ForexTB
- Select the CFD of the stock you are interested in and click on Buy (or on Sell to sell short)
- Decide the amount to invest.
Trade.com is a broker with many international licenses, including that of the CONSOB, necessary to trade in Europe.
One of the most interesting features of Trade.com is its entry threshold to open a trading account.
Unlike the competitors’ average of around 200 euros, on Trade.com you can open a real account with only 100 euros.
To improve the results obtained by traders, this Broker has created a totally free Trading Course.
The pdf is a kind of technical analysis manual, which explains in detail how to make speculative investments and how to make a profit.
The course is free and you can download it from the link below:Download the Trading Course for free by clicking here
The platforms made available by this Broker are two: MT4 and the Web Platform, both professional and free.
To make speculative investments on Trade.com you must follow these instructions:
- Register for free on Trade.com
- Log into your Demo or real account (by depositing a minimum of € 100)
- Select the CFD of the stock you are interested in and click on “Buy” to buy or “Sell” to sell short
- Decide how much to invest in the operation.
How a Speculative Investment works
Drawing a line between “simple” investments and speculative investments can be difficult.
For example, properties can become speculative investments when they are bought and resold quickly, but if you buy a property to rent it and return the investment in 20 years, then we certainly cannot define it as a speculative investment.
Among speculative investments we find Hedge Funds for example or ETFs, because they are often used for speculative purposes.
But even these options can become “simple” investments if they become long-term and the capital is repossessed after several years.
To better understand what characterizes speculative investments, here is the definition of speculation:
Speculation is the act of conducting a financial transaction that has a substantial risk of losing value but at the same time the expectation of a significant gain in a short period of time.
Speculative Investment in Forex
Among the most common speculative investments we find those in Forex.
Forex is a huge market where the currencies of all countries of the world are traded. It is estimated that over $ 6.6 trillion is traded on this market every day.
Investing in Forex means being able to operate 24/24 5 days a week and represents one of the most interesting investment options, especially due to its extreme volatility and high trading volumes that make prices fluctuate with high frequency.
This frequency is precisely the cause of the profit possibilities generated by Forex, which represents one of the most used speculative investments by traders all over the world, even by those who prefer small investments.
Speculative Investment in Stocks
There are numerous markets where speculative investments can find their “habitat” and among these the stock market is among the most interesting.
Investing in Stocks means making a direct investment in a company and has something tangible and verifiable, even if not always predictable.
Companies are ranked based on market capitalization and the value of outstanding shares and are among the most popular speculative investments in the world.
Speculative Investment in ETF
Mutual funds, hedge funds and above all ETFs are among the most widely used speculative investments.
Unlike stocks, they allow you to diversify without having to worry about creating a balanced portfolio.
ETFs are already well-balanced funds, tradable like equities, which can target a specific sector such as ETFs on renewables or ETFs on oil. Therefore they offer the possibility to reduce the risk while keeping the potential economic return high.
Speculative Investment in Cryptocurrencies
Although these are new in recent years, investing in cryptocurrencies can also be considered a speculative investment.
Cryptocurrencies are financial entities that fluctuate in a frightening way and this is both a virtue, if they go in the predicted direction, and a flaw if they go against our forecasts.
Beyond the sudden price movements, however, this market has also entered by right among speculative investments and is attracting an increasing number of investors, including large banks and institutional investors.
Speculative Investment Strategies
- Those who adopt Swing trading strategies keep their position open for up to several weeks hoping to capitalize on the gains during that period.
- Day trading is a more short-term form of speculation. Day traders trade frequently and usually hold their positions for one day, closing everything at the end of the day.
- Scalping is the most extreme strategy for making speculative investments, whoever adopts this methodology keeps positions open for a few minutes, sometimes a few seconds and is “satisfied” with making small gains by opening and closing dozens or hundreds of operations every day.
We conclude by saying that to obtain constant returns by making speculative investments you must find the right strategy for you, the market that best suits your style and the trading platform that suits you the most.
Keep in mind, however, that it is always better to diversify and not concentrate all your investments on a single stock or a single financial sector.
Speculative investments have a very high potential return but also a very high risk, so first do all the necessary tests on a Demo account, so that you are prepared for the actual investments.
The CFD Brokers we have proposed offer risk-free Demo accounts that allow you to test your platform, strategy and target market, without running any risk.
When you feel ready to make real speculative investments, just deposit money into the account of the chosen Broker! Here are the links to the Demo accounts of the brokers most suitable for speculative investments:
- Access the eToro Demo account for free by clicking here
- Register on ForexTB and try the Demo account by clicking here
- Register on Trade.com and try the Demo account by clicking here
It is a short-term investment that aim for a quick economic return and a high profit.
Of course, the higher the potential for returns, the greater the risk.
All short-term trading strategies such as Day Trading are fine.
With CFD brokers like eToro, which allow you to invest without paying commissions.