Speculative Capital

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DEFINITION of 'Speculative Capital'

The funds earmarked by an investor for the sole purpose of speculation. This capital is often associated with extreme volatility and a high probability of loss. Most speculators have short-term investment horizons and often use high degrees of leverage in their efforts to obtain profits.

INVESTOPEDIA EXPLAINS 'Speculative Capital'

Given the above average probability of loss in speculative trading, it is critically important to exercise good risk management and not become emotionally attached to a certain trade. It is not uncommon to see novice investors hold onto a position until it loses nearly all of its value. Given their limited experience, rookie traders should regard all their tradable capital as speculative capital. In other words, they should only invest whatever amount of money they can afford to lose without their way of life being materially affected.

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RELATED FAQS
  1. How can an investor profit from a decline in the real estate sector?

    Speculation enables investors to profit from a decline in the real estate sector. The most popular forms of speculation for ... Read Full Answer >>
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    There are no set guidelines or requirements that determine when a company will split its stock. Often, companies that see ... Read Full Answer >>
  3. What securities can I use to engage in speculation of an asset while limiting my ...

    If you want to engage in speculation of an asset while limiting your costs, use a derivative security. Since a derivative ... Read Full Answer >>
  4. How can an investor profit from a fall in the chemicals sector?

    An investor can profit from a fall in the chemicals sector by short selling chemical stocks and exchange-traded funds (ETFs), ... Read Full Answer >>
  5. Why is it a bad idea for beginning investors to speculate in penny stocks?

    A penny stock is the stock of a company that trades below $5 and generally trades on the over-the-counter bulletin board ... Read Full Answer >>
  6. What is the difference between speculation and gambling?

    Speculation and gambling are two different actions used to increase wealth. However, the two are very different in the world ... Read Full Answer >>
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