Speculative Risk: Definition & Examples

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Strategy Evaluation: Definition, Methods & Tools

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:01 Introduction to…
  • 0:46 Definition of Speculative Risk
  • 1:28 Examples of Speculative Risk
  • 2:50 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Michael Cozad

Michael is a financial planner and has a master's degree in financial services.

This lesson will provide an overview of speculative risk. This overview will provide the definition and several examples of speculative risk from an investor's point of view.

Introduction to Speculative Risk

Mary recently started her first job after graduating from state college. Fortunately for her, she was able to work several part-time jobs during college and graduated with no student loans. Now that she has received her first paycheck, she's interested in saving some of her earnings through investing. She turns on CBN, the local finance channel, where the television announcer mentions something about speculative risk as it relates to investing.

Mary can't sleep that night. She's heard good things about investing, but those two words, speculative risk, scare her. So, she searches online for the phrase and comes across this article. She sees that speculative risk is a risk, which, if accepted, results in an uncertain degree of loss or gain.

Definition of Speculative Risk

We just learned that if an investor, such as Mary, accepts speculative risk, then the outcome of her investment is uncertain. This frightens Mary. She thought that investing had been just that, investing, and that you choose which companies that you would like to own, and subsequently, purchase shares of stock. What Mary didn't know, however, is that there is a range of speculative risk. Think of a spectrum which has two ends. One end has less speculative risk, while the other has more. Different types of investment vehicles, such as different types bonds and stocks, then fill the spectrum. This is where Mary was getting confused. She thought all speculative risk was the same, when in reality there are different levels.

Examples of Speculative Risk

Almost all investment activities involve some risk. However, some risks are more risky than others. For example, historically, bonds have less speculative risk than stocks. This is due to the very definition of a bond. Think of a bond as a debt. Someone loans a company money, and the company promises to repay that loan with interest. Stocks, however, have no promise behind them, and thus, the investor asks for more reward since there is more risk.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account