Investing is the process of sacrificing the present value of a good (be it cash, time or some other type of asset) for it to multiply by the underlying growth of an ongoing or future opportunity (be it a project, a stock or asset) with solid economic fundamentals and approximately measurable risk obtained through thorough analysis and rational behavior. Therefore the risk/return objectives can objectively stated bounded by a time frame and can also be used for hedging. An investor can only go long to attain his specific risk/return objectives, if he goes short it is merely to hedge against unpredictable risk.

Speculation is also the sacrifice of the present value of an asset to obtain a benefit from the growth or losses (and loss is key) of an ongoing or future opportunity. Speculation can or cannot be based on solid fundamentals, thorough analysis and rational behavior. Speculation can have out sized returns or losses due to the uncertain nature of the underlying opportunity, it seeks to exploit volatility. Since short term volatility tends to be smoothed over time, speculation has a smaller time window. Speculation and hedging are also mutually exclusive, as Merton Miller stated "if you do not hedge you are a de facto speculator" which also reinstates that speculation mostly benefits from uncertainty.