Expected Return
What is Expected Return? The expected return on an investment is the expected value of the probability distribution of possible returns it can provide to investors. The return on the investment is an unknown variable that has different values associated with different probabilities. Expected return is calculated by multiplying potential outcomes (returns) by the chances of...
Short Covering
What is Short Covering? Short covering, also called “buying to cover”, refers to the purchase of securities by an investor to close a short position in the stock market. The process is closely related to short selling. In fact, short covering is part of short selling, which involves the risky practice of borrowing and selling...
Coattail Investing
What is Coattail Investing? Coattail investing refers to an investment strategy where an investor replicates the investment style of well-known successful investors. Individual investors use information published on the Securities Exchange Commission (SEC) website to know what companies a specific investor invested in. Coattail investing works well when the institution or investor being mimicked invests...
Pessimist vs. Optimist Investors
Pessimist vs. Optimist Investors Differentiating between pessimist vs. optimist investors is best defined by the saying, “A pessimist is an optimist with experience.” An optimist is hopeful and confident that things will turn out for the better. On the other hand, a pessimist always keeps in mind the possibility of the worst outcome. An optimist’s...
Hot Money
What is Hot Money? Hot money is the investment of funds between varying vehicles or assets in order to increase capital gains. In other words, a hot money strategy can be defined as the practice of actively using funds in various investments rather than just letting a single investment appreciate over time. The investments are...
