What is a Zero-Investment Portfolio?
The zero-investment portfolio is a financial portfolio that is composed completely or mainly by securities that cumulatively result in a net value of zero. In some instances, economists consider portfolios to be zero-investment portfolios when the resulting net value is almost zero. Generally, an investor will attempt to achieve a zero-investment portfolio for reasons relating to the rules of arbitrage. To understand the concept behind a zero-investment portfolio, it is necessary to grasp the fundamentals of arbitrage. Essentially, arbitrage is the process of buying certain amounts of securities on one market, while selling the same amount of the same or similar securities on another market. In some instances, the principle of arbitrage is also applied to buying and selling securities of like value on the same market. The point of arbitrage is to minimize the overall risk of losing money, while at the same time taking advantage of opportunities to make money. As applied to a zero-inves
If you love investing as a hobby and have been playing the stock market for a while testing out different investment concepts to see if you can make any financial profits. The financial products you buy and sell are mostly consisted of securities which accumulates to your stock portfolio to a net value of zero. The net value of zero or almost near zero is what economists would consider to be a zero-investment portfolio. A zero-investment portfolio is normally utilized for arbitrage. Arbitrage is when you buy certain securities in one market and at the same time you are selling those similar securities in another market – this is done so that investors can minimize their risks of losing money; and as they are buying and selling at the same time they are also taking opportunities of making money as well. When there is gain in capital, there are also taxes involved. Ultimately, zero-investment portfolios will help to minimize investors risks but it also helps to prevent having to pay high
