Zero-Investment Portfolio

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Zero-investment portfolio

A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy.

A portfolio consisting of long positions and short positions with no combined net worth. To give a very simple example, suppose one buys 100 shares in AT&T while simultaneously selling 100 shares; this creates a zero-investment portfolio. A zero-investment portfolio has the advantages of carrying little or no risk and reducing taxes. Obviously, however, there is little or no return on a zero-investment portfolio.

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