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

Upside

What it is:

Upside refers to an investment's potential gains in value.

How it works (Example):

For example, you purchase 100 shares of Company XYZ at $5 per share, for a total investment of $500. If you know or believe that Company XYZ shares will rise to $15 per share at some point, your upside equals ($15-$5 = $10) per share, or $1,000.

The reverse is true for people who short stocks: Their upside comes when the stock price falls.

Why it Matters:

Upside is the fundamental motive for making any investment. The size of the upside, of course, varies with the investment -- and with the risk associated with that investment. Higher-risk investments generally have more upside; low-risk investments generally have less upside and are thus primarily concerned with preserving the value of the original investment.

Ultimately, expected upside is based on estimates and educated guesses. No analyst or investor can predict the future, thus making upside inherently unpredictable.

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