DEFINITION of 'Zero-Investment Portfolio'
A group of investments which, when combined, create a zero net value. Zero-investment portfolios can be achieved by simultaneously purchasing securities and selling equivalent securities. This will achieve lower risk/gains compared to only purchasing or selling the same securities.
INVESTOPEDIA EXPLAINS 'Zero-Investment Portfolio'
Zero-investment portfolios have many uses, including:
1. Reducing taxes, because they generate little or no interest income.
2. Reducing risk by protecting against unexpected shifts in the value of the held securities.
3. Protecting the overall value of the portfolio so that investment can be made at a later date.
4. Determining if the average portfolio returns are statistically different from zero.
For example, if John bought (that is, took a long position) one share of XYZ Corp., he would be fully exposed to the change in value of that stock. If, however, John sold the same stock (that is, took a short position), then any movement up or down would be canceled out. The combination of these two positions creates a zero-investment portfolio.
An investment strategy applied to a personal or corporate portfolio ...
A portfolio constructed to have zero systematic risk or, in other ...
The simultaneous purchase and sale of an asset in order to profit ...
An investment strategy that aims to balance risk and reward by ...
1. The management of a client's investments by a financial services ...
1. The buying of a security such as a stock, commodity or currency, ...