What Does Swing for the Fences Mean?

"Swing for the fences" is an attempt to earn substantial returns in the stock market with bold bets. The term "swing for the fences" has its origins in baseball. Batters who swing for the fences try to hit the ball over the fence to score a home run. Similarly, investors who swing for the fences attempt to obtain large returns, often in exchange for significant risk.

Key Takeaways

  • Swing for the fences means to chase substantial stock market gains with aggressive bets, often in exchange for significant risk.
  • Swing for the fences can also refer to making large and potentially risky business decisions.
  • Portfolio managers rarely swing for the fences, since they have a legal and ethical obligation to act in their clients’ best interests.

Understanding Swing for the Fences

In addition to making risky investments, the expression "swing for the fences" can also refer to making large and potentially risky business decisions outside of the public markets. For example, a CEO might "swing for the fences" and try to acquire his company's biggest competitor.

Swinging for the Fences and Portfolio Management

Portfolio management is the art and science of balancing an investment mix to adhere to specific objectives and policies for asset allocation for individuals and institutions. Portfolio managers balance risk against performance, determining strengths, weaknesses, opportunities, and threats to achieve an optimal outcome.

Portfolio managers rarely swing for the fences, particularly when managing client funds. If the manager is simply trading his or her own account, he or she might be willing to take on greater risk; however, when acting as a fiduciary for another party, a portfolio manager is legally and ethically bound to act in the other's best interests. This generally means cultivating a diverse mix of investments across asset classes and balancing debt versus equity, domestic versus international, growth versus safety, and many other tradeoffs in an attempt to maximize return at a given appetite for risk without placing too much emphasis on high-reward bets.

Swing for the Fences Practical Example

A swing for the fences could be investing a significant portion of an individual portfolio in a hot new initial public offering (IPO). IPOs are often riskier than investing in more established, blue-chip companies, with a consistent history of returns, dividends, proven management, and a leading industry position.

While many IPOs have the potential to earn a home run for investors with industry-changing technologies or exciting new business models, their history of profits are often inconsistent (or non-existent, in the case of many young software companies). Investing an outsized portion of one's portfolio in an IPO could occasionally produce significant returns, but it also introduces undue risk for the investor.

For example, let’s assume David has $100,000 to invest and believes ride-sharing company Uber Technologies Inc. will continue disrupting global transportation networks. Instead of building a diversified portfolio, David decides to "swing for the fences" and invest all of his capital in Uber when the company's stock lists on the New York Stock Exchange (NYSE). He subsequently purchases 2,380 shares at the $42 opening price on May 10, 2019. However, by mid-August, David's investment in the tech unicorn is worth $82,371.80 (2,380 x $34.61) as the stock has fallen 18% from its listing price.

Had David taken a more diversified approach and purchased the SPDR S&P 500 ETF (SPY)—an exchange-traded fund (ETF) that tracks the performance of the S&P 500 Index—his investment over the same period would have increased by 3%. In this particular example, David's swing for the fences bet hasn't yet paid off.