WHAT IS 'Invest, Then Investigate'

Invest, then investigate is an investment strategy in which investors purchase a stock first and then do research and due diligence second.

BREAKING DOWN 'Invest, Then Investigate'

Invest, then investigate, or investing first and researching next, is a risky and speculative approach to making investment decisions. This method is often used by individuals who have either an unfounded hunch that a security's price will move in a particular direction, or who are acting on impulse. Any research or due diligence is performed after the position has been opened and the individual decides to either hold or close the position. This is the opposite of the investigate, then invest approach to investment decision making. 

The use of the term invest, then investigate is often used humorously, as it makes more sense to joke about investing before doing any research than it does to actually invest first and then do due diligence later. When used as a joke it can be a variant on the idea of choosing investments by throwing a dart at a dartboard.

Invest, then investigate is an untraditional investment method that defies common wisdom and logic. However, some investors may use this strategy to test the waters of a trade. If they invest and the position is profitable, they can add to it and potentially increase profits; if the position is unprofitable, the position can be closed for a loss. Famous investor George Soros is known to invest first and investigate later to avoid missing rapidly changing market opportunities. Many investors would view this method of investing as gambling and prefer, instead, to investigate potential positions first and then risk money to test the theory.

Risks and Rewards of Invest, Then Investigate

The most obvious risk of the invest, then investigate method of investing is the possibility to lose large sums of money on faulty investments. Hunches, statistically speaking, are often wrong, so a hunch probably won’t give you the return on following it. Another potential risk of the invest, then investigate strategy is that others may lose faith in your judgment if you refuse to do any due diligence before putting their money into the market. Even if you become lucky and the investment pays off, the loss of trust may follow you with that investor.

In contrast, if no one has done much investigation of a particular opportunity, it is possible to get a great return without having to do much legwork to explore. An investment may be a hidden gem that no one knows about that is just waiting for you to invest in it.

  1. Loss Adjustment Expense (LAE)

    A loss adjustment expense (LAE) is an expense associated with ...
  2. Opportunity Cost

    Opportunity cost is a benefit missed when an investor, individual ...
  3. Investment

    An investment is an asset or item that is purchased with the ...
  4. Loss Cost

    Loss cost is the amount of money an insurer must pay to cover ...
  5. Section 232 of the Trade Expansion ...

    Section 232 of the Trade Expansion Act of 1962, authorizes the ...
  6. Reservation Of Rights Letter

    A reservation of rights letter is provided to the insured party ...
Related Articles
  1. Insights

    SEC Subpeonas 4 Banks in ADR Investigation: Report

    As if the big banks haven't gotten into enough regulatory hot water over the past few years, a clutch of major financial institutions are being investigated by the Securities and Exchange Commission ...
  2. Insights

    New York AG Investigates Exxon's Accounting (XOM)

    The state's top prosecutor is investigating the reasoning behind Exxon Mobil Corp.'s decision not to write down the value of its energy assets, despite the crash in oil prices.
  3. Insights

    Could An Antitrust Investigation Destroy Google?

    The European Commission is investigating Google's practices to see if the company is not playing fair. Investors should watch for any potential impact.
  4. Trading

    Choosing between dollar-cost and value averaging

    Learn more about dollar-cost and value averaging, two investing methods that seek to counter our natural inclination toward market timing.
  5. Investing

    7 Costly Stock-Buying Mistakes to Avoid

    No investor is flawless. Here are some common investing fallacies and a step-by-step guide on how to avoid them when buying stocks.
  6. Investing

    Boeing Under SEC Probe for 787, 747 Accounting

    Boeing is under SEC investigation for accounting issue regarding 787, 747 airliners.
  7. Investing

    Is It Wise to Copy George Soros's Investment Strategy?

    One of the most successful investors ever is George Soros. Does that means you should follow his investing strategy?
  8. Investing

    Due Diligence in 10 Easy Steps

    Learn how due diligence offers key information for potential investments. Find out how these 10 important steps can give you a balanced views of pros and cons of your investments and allow you ...
  9. Investing

    Investing FAQs: 10 Common Questions Answered

    The answers to these 10 common questions can help you feel more comfortable about investing for the first time.
  10. Investing

    The Art Of Selling A Losing Position

    Knowing whether to sell or to hold is tough. And no rule fits all. Find out what to consider.
  1. What's the difference between credit reports and investigative consumer reports?

    Learn about the major differences between two types of risk-evaluation reports: consumer credit reports and investigative ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  2. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  3. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  4. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  5. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  6. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
Trading Center