Coattail investing

Coattail investing

A risky trading practice of making trades similar to those of other successful investors, usually institutional investors.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Coattail Investing

An investment strategy in which one buys most or all of the same securities as a historically successful and usually well-known investor. One buys these securities as soon as the famous investor's decision is made public. It is a risky strategy as it ignores portfolio implications and risk analysis. For example, one may buy a stock after it has already gone up in price considerably, and may already have become overvalued. Alternatively, one may sell the same stock after its downward trend has become well established and it may have already become undervalued. However, it can be a profitable strategy if the coattail investor adopts a buy-and-hold mentality because, in the long term, the famous investor is often correct. See also: Chasing the market.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved