Lemon

AAA

DEFINITION of 'Lemon'

A very disappointing investment. A lemon is an investment in which your expected return wasn't even close to being achieved, and more than likely ended up losing you some or all of the capital committed. Lemon investments can be associated with poor money management, economic factors, financial fraud or just plain bad luck.

INVESTOPEDIA EXPLAINS 'Lemon'

The most common and well-known example of a lemon is in the used car industry, where defective or poorly conditioned vehicles that are bought and sold by the purchaser without prior knowledge of the true state of the vehicle. There are, however, regulations in the U.S. that attempt to protect consumers in the event that they purchase a defective vehicle, known as Lemon Laws.

RELATED TERMS
  1. Clunker

    A popular reference to the old vehicle traded in under the U.S. ...
  2. Cash For Clunkers

    A program that allows car owners to trade in their old, less ...
  3. Underperform

    An analyst recommendation that means a stock is expected to do ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that ...
  5. Abnormal Return

    A term used to describe the returns generated by a given security ...
  6. Return

    The gain or loss of a security in a particular period. The return ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>
  6. How does an investor compute a Seasonally Adjusted Annual Rate of Sales for an automotive ...

    The seasonally adjusted annual rate of sales (SAAR) for an automotive company can be calculated by taking the unadjusted ... Read Full Answer >>
Related Articles
  1. Budgeting

    How To Avoid Buying A "Lemon" Product

    A lack of information can lead people into bad purchases and bad investments. Find out how you can avoid these lemons.
  2. Home & Auto

    Did You Buy A Lemon?

    Find out how to fix a sour deal on your car purchase.
  3. Home & Auto

    Used Car Shopping: How To Avoid A Lemon

    Being prepared before buying will save you thousands in the long run.
  4. Home & Auto

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
  5. Home & Auto

    New Wheels: Lease Or Buy?

    These two major ways to obtain a car have very different advantages and drawbacks. Find out which is best for you.
  6. Options & Futures

    Top Tips For Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  7. Options & Futures

    Car Shopping: New Or Used?

    Don't get taken for a ride. Learn the pros and cons before the salesperson makes a pitch.
  8. Economics

    What's a Stock Keeping Unit (SKU)?

    A SKU, or bar code, is a unique identification code that retail and wholesale sellers use to track their inventory of products and services.
  9. Economics

    Explaining Consumer Discretionary

    Consumer discretionary is a term from economics that refers to the sector of the economy that produces goods and services that are nonessential.
  10. Economics

    Explaining Aggregate Supply

    Aggregate supply is the total supply of goods and services an economy produces in a given time period.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!