Sacred Cow

AAA

DEFINITION of 'Sacred Cow'

A firmly held mainstream belief that is considered to be true without independent verification. In finance, and in particular in investing, there are many sacred cows that are thought to be true, but are difficult to prove scientifically.

INVESTOPEDIA EXPLAINS 'Sacred Cow'

Some examples of sacred cows in finance include: one should save 10 to 15% of one's pay for retirement, or over the long run, investment returns are commensurate with risk. While these statements are widely accepted and infrequently argued against, not all are absolute truths. In the book "Killing Sacred Cows," the author identifies some myths and fallacies that have been accepted and preserved through the years in the financial world.

RELATED TERMS
  1. Historical Returns

    The past performance of a security or index. Analysts review ...
  2. Retirement

    When a person chooses to leave the workforce. The concept of ...
  3. Average Return

    The simple mathematical average of a series of returns generated ...
  4. Risk

    The chance that an investment's actual return will be different ...
  5. Investment

    An asset or item that is purchased with the hope that it will ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
RELATED FAQS
  1. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  2. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
  3. How do I discount Free Cash Flow to the Firm (FCFF)?

    Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present ... Read Full Answer >>
  4. What is RiskMetrics in Value at Risk (VaR)?

    RiskMetrics is a methodology that contains techniques and data sets used to calculate the value at risk (VaR) of a portfolio ... Read Full Answer >>
  5. What are some of the advantages and disadvantages of DuPont Analysis?

    DuPont analysis is a potentially helpful tool for analysis that investors can use to make more informed choices regarding ... Read Full Answer >>
  6. How is risk aversion measured in Modern Portfolio Theory (MPT)?

    According to modern portfolio theory, or MPT, degrees of risk aversion are defined by the additional marginal return an investor ... Read Full Answer >>
Related Articles
  1. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
  2. Investing Basics

    The Five Biggest Stock Market Myths

    Stocks that go down must come up, right? Wrong. We bust this myth and four other common market misconceptions.
  3. Budgeting

    Debunking 10 Budget Myths

    Don't let these excuses prevent you from reaching your financial goals.
  4. Investing Basics

    Is Stock Picking A Myth?

    Find out if mutual fund managers can successfully pick stocks or if you're better off with an index fund.
  5. Retirement

    10 Bank-Breaking Money Myths

    Just because a belief is common, doesn't mean that it's true. Here we separate fact from fiction.
  6. Budgeting

    Dispelling 5 Myths About Financial Planners

    Raise your returns or lower your losses; these often misunderstood specialists can help guide you.
  7. Economics

    Where To Search For Yield Today

    It’s hard to miss that there has been a pronounced slowdown in the U.S. economy this year.
  8. Economics

    What is the Private Sector?

    The private sector encompasses all for-profit businesses that are not owned or operated by the government.
  9. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  10. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.

You May Also Like

Hot Definitions
  1. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  3. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  4. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  5. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center