Investment Thesis

AAA

DEFINITION of 'Investment Thesis'

The beliefs that investors decide to use when determining what investments to purchase or sell, when to take an action and why. An investment thesis helps investors establish goals for their investments, and measures whether they have been achieved, either in written form or simply as an idea. A sound investment thesis can be a foundation for a profitable portfolio. On the other hand, an incorrect investment thesis can result in sub-par returns or losses.

INVESTOPEDIA EXPLAINS 'Investment Thesis'

Most investment theses are in written form, and can be used to look back and analyze why a particular decision was made in the first place - and if it was the right one.
Let's say an investor purchases a stock based on the investment thesis that the stock is undervalued. The thesis further states that the investor plans to hold the stock for several years, during which he expects its price to rise and reflect its true worth. At that point, he intends to sell at a profit. When the stock market crashes a year in and everyone is selling, the investor reminds himself of his investment thesis. He decides that he should not sell, but rather continue to rely on his original analysis and hold the stock.

RELATED TERMS
  1. Exit Strategy

    1. The method by which a venture capitalist or business owner ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  4. Prospect Theory

    A theory that people value gains and losses differently and, ...
  5. Metrics

    Parameters or measures of quantitative assessment used for measurement, ...
  6. Current Liquidity

    The total amount of cash and unaffiliated holdings compared to ...
Related Articles
  1. Would You Profit As A Day Trader?
    Active Trading

    Would You Profit As A Day Trader?

  2. Invest With A Thesis
    Mutual Funds & ETFs

    Invest With A Thesis

  3. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

  4. Tips For Investors In Volatile Markets
    Investing

    Tips For Investors In Volatile Markets

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center