Vanilla Strategy

AAA

DEFINITION of 'Vanilla Strategy'

An approach to investing or to business decision-making that is basic and common. Some investors and businesses excel because they choose an ordinary, vanilla strategy, while others succeed through innovation. In derivatives trading, a vanilla strategy is the use of two different plain vanilla instruments, such as swaps, at the same time.

INVESTOPEDIA EXPLAINS 'Vanilla Strategy'

For example, a vanilla strategy for retirement saving might include saving at least 10% of one's annual income, investing in diversified portfolio of stocks and bonds through tax-advantaged savings accounts like a 401(k) and Roth IRA, and buying a home with a plan to pay off the mortgage before reaching retirement. There is nothing interesting or unique about this strategy - it is "vanilla" because it is ordinary.

RELATED TERMS
  1. Derivative

    A security whose price is dependent upon or derived from one ...
  2. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  3. Exotic Option

    An option that differs from common American or European options ...
  4. Vanilla Option

    A financial instrument that gives the holder the right, but not ...
  5. Option

    A financial derivative that represents a contract sold by one ...
  6. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
Related Articles
  1. Options & Futures

    Are Derivatives Safe For Retail Investors?

    These vehicles have gotten a bad rap in the press. Find out whether they deserve it.
  2. Options & Futures

    Introduction To Weather Derivatives

    Learn about a financial instrument that makes temperature a tradable commodity.
  3. Active Trading

    How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  4. Options & Futures

    Retirement Planning Basics

    Realizing your post-work goals need not be daunting. We'll tell you everything you need to know to get - and stay - on track.
  5. Trading Strategies

    What does a double bottom tell a trader about the overall trend?

    Learn how a double bottom pattern forms on a price chart and why many traders consider double bottoms to be a sign of reversal in the price trend.
  6. Technical Indicators

    What are common trading strategies used when identifying a double bottom

    Use simple, low-risk trading strategies to take advantage of a double bottom formation. Traders typically take one of these approaches to buying the market.
  7. Technical Indicators

    What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of your investment.
  8. Trading Strategies

    Why is divergence between indicators important for traders?

    Learn what technical analysts mean by a "divergence" between indicators, and determine why a divergence could be a sign the current price trend is ending.
  9. Trading Strategies

    How effective is creating trade entries after spotting a Morning Star pattern?

    Understand the elements of the morning star candlestick pattern and how to best utilize this reversal signal to create effective trade entries.
  10. The risk-free rate of return is the theoretical rate of return of an investment with zero risk.
    Investing

    Risk-Free Rate of Return

    The risk-free rate of return is the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free ...

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center