Swing for the Fences
What Does "Swing for the Fences" Mean?
"Swing for the fences" is an endeavor to earn substantial returns in the stock market with strong wagers. The term "swing for the fences" has its beginnings in baseball language. Players who swing for the fences try to stir things up around town over the fence to score a homer. Also, investors who swing for the fences endeavor to get large returns, frequently in exchange for huge risk.
As well as making risky investments, the maxim "swing for the fences" can likewise allude to going with large and possibly risky business choices outside of the public markets. For instance, a CEO may "swing for the fences" and try to acquire their company's greatest rival.
Figuring out Swing for the Fences
Portfolio management is the art and science of adjusting an investment mix to stick to specific objectives and policies for asset allocation for individuals and institutions. Portfolio managers balance risk against performance, determining qualities, shortcomings, opportunities, and dangers to accomplish an optimal outcome.
Portfolio managers rarely swing for the fences, particularly while overseeing client funds. On the off chance that the manager is essentially trading their own account, they may face greater risk; challenges, while 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 developing a different mix of investments across asset classes and adjusting debt versus value, domestic versus global, growth versus security, and numerous different tradeoffs trying to boost return at a given craving for risk without putting too much accentuation on high-reward wagers.
Special Considerations
A swing for the fences could be investing a huge portion of an individual portfolio in a hot new initial public offering (IPO). IPOs are frequently riskier than investing in more settled, blue-chip companies, with a steady history of returns, dividends, proven management, and a leading industry position.
While numerous IPOs can possibly earn a homer for investors with industry-changing technologies or energizing new business models, their history of profits is frequently conflicting (or non-existent, on account of numerous youthful software companies). Investing an outsized portion of one's portfolio in an IPO could periodically create critical returns, yet it additionally presents undue risk for the investor.
Instance of Swinging for the Fences
For instance, we should accept Alex has $100,000 to invest and accepts ride-sharing company Uber Technologies Inc. will keep upsetting global transportation organizations. Rather than building a diversified portfolio, Alex chooses to "swing for the fences" and invest all of their own capital in Uber when the company's stock records on the New York Stock Exchange (NYSE). Alex hence purchases 2,380 shares at the $42 opening price on May 10, 2019. Notwithstanding, by mid-August, Alex'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 Alex adopted a more diversified strategy and purchased the SPDR S&P 500 ETF (SPY) — a exchange-traded fund (ETF) that tracks the performance of the S&P 500 Index — Alex's investment over a similar period would have increased by 3%. In this particular model, Alex's swing for the fences bet hasn't yet paid off.
Features
- "Swing for the fences" can likewise allude to pursuing large and possibly risky business choices.
- "Swing for the fences" means to pursue substantial stock market gains with aggressive wagers, frequently in exchange for critical risk.
- Portfolio managers rarely swing for the fences, since they have a legal and ethical obligation to act in their clients' best interests.
