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.

BREAKING DOWN '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. Reinsurance Sidecar

    A limited purpose company created to work in tandem with insurance ...
  2. Investing

    The act of committing money or capital to an endeavor with the ...
  3. Salomon Brothers

    Salomon Brothers, founded in 1910, was once one of the largest ...
  4. Personal Equity Plan - PEP

    An investment plan in the U.K. that used to allow people over ...
  5. Managed Money

    A means of investment where the investor, rather than buying ...
  6. Coattail Investing

    An investment strategy in which investors mimic the trades of ...
Related Articles
  1. Investing

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.
  2. Investing

    Flipping Houses: Is It Better Than the Buy and Hold Strategy?

    Real estate investors can choose to flip a property or hold it. Find out which strategy may best for you.
  3. Investing

    What's a No-Load Fund?

    A no-load fund is a type of mutual fund that does not charge a front-end, back-end or level sales charge.
  4. Managing Wealth

    Invest Like A Pro

    By following the strategies of the pros, even a beginner can learn to invest like an expert.
  5. Investing

    The Best Ways to Invest $500 to $5,000

    Got a small budget? Here are some investing tips.
  6. Managing Wealth

    4 Steps To Creating A Better Investment Strategy

    Make your trading safer and more streamlined by following these simple guidelines.
  7. Investing

    Where to Invest Your Money? 10 Steps to Financial Success

    Learn where to invest your money ten steps. Included is how to develop a proper investment plan, different investment products and brokerage options.
RELATED FAQS
  1. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
  2. How can I make equity investments in real estate?

    Invest in real estate equity through buying and selling real property or through other more liquid investments like real ... Read Answer >>
  3. What are the differences between investing in real estate and stocks?

    Invest in real estate by purchasing physical property or buildings, or invest in stocks by buying a claim to a company and ... Read Answer >>
  4. What is the difference between diversification and hedging?

    Learn what diversification and a hedge are, how investors can diversify and hedge their investments, and the main difference ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  3. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  5. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
Trading Center