How does buying on margin differ from speculation?

Answer 1

Buying on margin involves borrowing funds from a brokerage to purchase more shares than one can afford, allowing investors to leverage their investments and potentially amplify returns, but also risks greater losses. Speculation, on the other hand, refers to the practice of investing in assets with high risk and potential for significant short-term price fluctuations, often based on market trends rather than fundamental value. While both strategies involve risk, buying on margin specifically entails using borrowed money, whereas speculation focuses on the nature of the investment itself.