Speculative is out, boring is in: 5 red flags to differentiate an investment from a gamble, according to Morningstar’s vice president of research

• As the economy spirals toward a potential recession, speculative investing is out and boring is in.
• Morningstar’s John Rekenthaler shared five signals to discern an investment from a gamble.
• While “speculation can be lucrative,” he believes investors should recognize the difference.

2021 was the year of speculative investing frenzy, as the valuations of assets that are traditionally considered more volatile — cryptocurrencies, NFTs, special purpose acquisition companies (SPACS), and meme stocks — skyrocketed.

Today, it’s a starkly different landscape as the market heads into a potential recession and investors try to determine the market’s trajectory. Multiple bubbles have popped and fizzled in the last few months, and the speculative investing furor has died down substantially.

In an economy marked by heightened uncertainty, investors and analysts alike have decided that boring assets are in, and speculative assets are out.