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A speculator bets on the price movement of a security to gain a profit.

Expanded Definition

There are two basic types of people, as the old joke goes. Here, we'll define them as "investors" and "speculators." Investors buy shares of a business, expecting the business' performance to drive the increase in share price, from which they will benefit. Speculators, on the other hand, buy shares looking strictly for that price increase, regardless of the business those shares came from.

As such, they tend to be focused more on the short term, following the "votes" of the market, as described by Benjamin Graham, rather than waiting around for the weighing machine to, um, weigh in. They are more interested in short term movements, taking advantage of the quick run ups or declines that every stock is subject to, betting on how quarterly earnings reports, for instance, will affect the share price.

They may be day traders or momentum traders. They are not business owners. These are the gamblers of the stock market. Some might even say that they view the stock market as a big game that they must win, rather than a place to build wealth.

Now, this is a perfectly legitimate way to invest. It isn't what we would call Foolish, but many people do it and can do well at it. However, we at The Motley Fool generally view ourselves as investors, buying a portion of the business, rather than buying a piece of paper whose value we hope or expect to go up in a relatively short period of time.

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