The difference between what I consider investors and speculators in stocks can be seen in many ways through stock investment boards. I have monitored several investment boards for years and I would like to make several comments on the behavior I have observed.
It seems, with several big exceptions, most users of message boards are speculators, not investors. Evidence of this is observable when a particular company stock price goes down, posters start complaining that the company is not doing something right, the management has lost its touch, etc. The speculators totally ignore an important point during a price decline; they have invested in a part of a business, not just a piece of paper, i.e. a stock certificate. If the speculators had done their research, they would understand the company and if nothing fundamental has changed they would be looking at a price decline as an opportunity that Mr. Market has given investors to pick up more shares at a better price.
This brings me to another point concerning price declines, speculators think this is the worst thing that can happen to them, I fail to understand their reasoning, volatility is the investor's friend, you can buy more of a good business at a better price. In the long run (which I consider a minimum of five years) this volatility benefits investors by providing better returns since companies will almost always gravitate towards its real value (or intrinsic value).
To this point many speculators have this rebuttal, I can't afford to be losing money in stock X when stock Y has doubled over the same time period (I add can understand this point of view, this is where you must have a strong belief that you are thinking correctly). This is where the concept of investing versus speculation comes into play. An investor looks for companies that he understands and is able to come up with an approximate value. He or she then invests when the companies' stock price is at, or below, that value. A speculator looks for the hottest game in town and tags along for the ride, wherever it may lead him or her. So an investor views a stock price decline (excluding declines due to changing fundamentals) as an opportunity while a speculator worries that they have been following the wrong game.
Another point that needs to be observed is that any rational person understands that all stocks have a period of underperformance at times (sometimes for significant periods). You have to believe in your reasoning, if you believe your reasoning is correct and you have done your homework, why let a temporary decline influence your judgment?
A person's time horizon should also be considered when investing, I do not believe the stock market is the best place for short-term investments due to its volatility. Also another very important factor to consider is how you can handle stock declines, an investor must have the fortitude to watch significant price declines happen and not let it affect his/her judgment. If they don't they can seriously jeopardize their long run returns by exiting at the wrong time.