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I am a beginner investor. I have seen some speculative shares where I saw a potential of profit earning. But I am scared of the risk. So I want to ask if I need to be aware of something while trading in these stocks.

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    Speculation is by definition less safe than investment, which is less safe than a high-rated bond, which is less safe than a government- backed bond out government-insured bank account. Increased potential for profit is always balanced by increased risk of loss. You need to pick something, or more commonly a mixture of things, that balances this at a level you're comfortable with. Speculation, if you want to play with it at all, should not exceed an amount you would be willing to lose if it doesn't work out. – keshlam Mar 26 '16 at 16:10
  • @keshlam +1 for the definition of speculation. – NuWin Mar 26 '16 at 20:00
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You're right to be concerned with the added risk of speculative shares. Understand your investments! Consider limiting your risk until you have experience investing. The worst outcome would be to lose your capital and stop investing.

Speculative stocks will have higher volatility. Their valuation typically soar in a bull market, but suffer high losses in economic downturns when investors rush to the safety of larger companies, bonds, or cash.

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If you are scared of the risk then you should not invest in them.

If you are looking for some 'secret' about these securities… there isn't any.

I use high Beta (volitile) securities when I speculate.

If you want protection against inflation and safety then invest in I-series Treasury bonds. They earn (just a little bit) of interest above and beyond the inflation rate. Couple that with the tax deferred nature of an IRA and you will not lose money. Here is a link to a description of I series bonds.

If you do it in a 401(K) then you get the benefit of the employer match as well as the tax deferred benefit.

  • +1 from me, for the sentiment behind that first line. The DVer should comment on why he takes issue with this answer. – JTP - Apologise to Monica Mar 26 '16 at 12:09

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