Sidecar Investment

AAA

DEFINITION of 'Sidecar Investment'

An investment strategy in which one investor allows a second investor to control where and how to invest the capital. The sidecar investment will usually be used when one of the parties lacks the ability or confidence to invest for themselves. The strategy will place trust in someone else's ability to gain profits.

INVESTOPEDIA EXPLAINS 'Sidecar Investment'

The word "sidecar" refers to a motorcycle sidecar; the person riding in the sidecar must place his or her trust in the driver's skills. This differs from coattail investing, where one investor mimics the moves of another.

For example, suppose there are two individuals - Fred, who is experienced in trading stock, and Barney, who has a background in real estate. They decide to work together in a sidecar investing strategy. In this case, Fred would give Barney money to invest in real estate on his behalf and Barney would give Fred money to invest in stocks. This setup allows both Fred and Barney to diversify their portfolios and benefit from one another's expertise.

RELATED TERMS
  1. Coattail Investing

    An investment strategy in which investors mimic the trades of ...
  2. Tailgating

    When a broker or advisor buys or sells a security for a client(s) ...
  3. Portfolio Manager

    The person or persons responsible for investing a mutual, exchange-traded ...
  4. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  5. Money Manager

    A business or bank responsible for managing the securities portfolio ...
  6. Reinsurance Sidecar

    A limited purpose company created to work in tandem with insurance ...
RELATED FAQS
  1. How can I use the holding period return yield to determine whether or not I should ...

    Use the holding period return yield formula to determine whether the time is right to sell your bond. With this calculation, ... Read Full Answer >>
  2. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  3. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. Which socially responsible retailers appeal most to ethical investors?

    Ethical investors have many reasons to consider companies in the retail sector. The sector is broad and features an abundance ... Read Full Answer >>
  6. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Why You Shouldn't Manage Your Friends' Money

    Your pals may like your returns, but it isn't wise for you to manage their money.
  2. Personal Finance

    4 Tips For Joining An Investment Club

    These circles of like-minded people are a wonderful way to explore investing without laying out large sums.
  3. Options & Futures

    Guide to Stock-Picking Strategies

    There are many ways to make money, knowing how to choose the best stocks is one of them.
  4. Investing

    The Number One Reason Why Most Traders Fail

    We show you the simple tools, availble to everyone, to succeed as an active trader: education, experience, charts, vision, and risk management systems.
  5. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun
  6. Investing Basics

    Is Divestment Destroying The Coal Industry?

    Should you worry about your investments in coal companies due to coal divestment campaigns? Investopedia explores the impact of protest divestment on the coal industry.
  7. Fundamental Analysis

    Vice Can Be Nice: 4 Sin Stocks to Consider

    These four sin stocks are likely to be resilient during a bear market.
  8. Mutual Funds & ETFs

    Are Currency Hedged ETFs a Good Idea?

    Considering currency-hedged ETFs? Here's a look at eight and what you need to know right now.
  9. Stock Analysis

    Where Does Yahoo (YHOO) Go From Here?

    Yahoo operates in a competitive environment, but if it makes the right deals there's no reason why it can't thrive.
  10. Investing Basics

    What You Learn at University Investment Clubs

    University investment clubs are where Wall Street and the classroom intersect.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
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!