What Is Take a Flier?

Take a Flier is a colloquial term referring to the risk an investor takes when they knowingly make an investment that may result in a significant loss.

Understanding Take A Flier

Take a Flier is a slang term describing the actions of a person who knowingly engages in a risky activity. The investment world often uses this term to describe the actions of an investor choosing to invest in highly speculative investments, with an awareness that they may lose money on the investment.

Often, when an investor takes a flier, the feeling of risk in the investment is mitigated by the potential for a significantly higher return if and when the investment pays out. An investor may also take a flier on an investment they believe in, but which may not result in a large return. For instance, an investor backing an emerging industry make invest on the basis of a personal obligation, sometimes with the hope of profiting or breaking even at a far future date.

There is any number of circumstances that a particular investment may present an increased risk, and in most cases, such strategies are only recommended for experienced investors. While all types of investment include some risk, those who take a flier on an investment are typically prepared to see no return on that investment, and perhaps take a total loss.

Common Ways to Take a Flier

Four common situations in which an investor may be tempted to take a flier include initial public offerings, futures trading, options trading, and penny stocks.

  • Initial Public Offerings (IPOs) offer investors the opportunity to invest in a company that enters the public trading market for the first time. IPOs function as a method for a growing company to attract a large amount of capital in a short period and are frequently met with excitement both in the market and in the press. Risks abound in IPO investment. A company emerging in the stock market always carries a degree of uncertainty regarding its long-term viability in the marketplace. High publicity can skew the valuation of a company, sometimes leading to an overvaluation of that company and a less advantageous return on investment. Alternatively, an IPO without a great deal of public attention may result in stock that is undervalued as it emerges on the market, and thus a greater return for investors. Analysts have shown that 80 percent of IPOs trade below their initial price within the first five years.
  • Futures Trading, in which the investor agrees to purchase an asset at a specified price at a future date. Frequently used in commodities trading, this type of investment initially emerged as a way for farmers to hedge against the value of crops between planting and harvest. Futures trading obligates the buyer to purchase the asset at the specified time at the predetermined price. 
  • Options Trading offers the buyer a contract for the right, but not the obligation, to purchase a security at a specific price at a future date. Both futures and options are risky because they each specify a time requirement on a trade, and the actual price of the security at the time set by the buyer is disadvantageous, the buyer will take a loss, particularly in volatile markets.
  • Penny Stocks, or stocks that trade for less than a dollar per share, can result in significant profits. Stock performance in this category is highly unpredictable, and this area of the market is at the greatest risk of fraud.

Some other common high-risk strategies include venture capital investments, emerging and frontier markets, leveraged ETFs, limited partnerships, currency trading, junk bonds, and hedge funds