Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

One-Night-Stand Investment

What it is:

Most investors have made decisions that they eventually regret. One-night-stand investments are simply decisions that investors regret sooner rather than later, turning what are supposed to be long-term investments into short-term ones. What causes the regret can vary widely: putting too much of one's portfolio in an investment, hearing bad news about the investment, and not delivering up to earnings expectations are some examples.

One-night-stand investments are a topic that behavioral finance researchers often study.
 

How it works (Example):

Let's say John Doe goes to an investing seminar that hypes the stock of a beverage company that sells juice formulations intended to improve sex drive. John listens to the presentation and is pretty impressed, so he invests $20,000 in the stock.

The next day, John speaks to his financial advisor, who can't believe that he fell for such a terrible sales job. He urges John to get out of the stock, and he does. John's investment in the beverage company is a one-night-stand investment.

Why it Matters:

A one-night-stand investment is a security that was supposed to be a long-term investment but is sold after a short time.