What is a One-Night-Stand Investment?
A one-night-stand investment is a security that was supposed to be a long-term investment but is sold after a short time.
How Does a One-Night-Stand Investment Work?
Let's say John Doe goes to an investing seminar that hypes the stock of a beverage company that sells juice formulations that make wild claims about how they might improve someone's health. John listens to the presentation and is impressed, so he invests $20,000 in the stock.
The next day, John speaks to his financial advisor, who can't believe that he fell for such a terrible sales job. He urges John to get out of the stock, and he does. John's investment in the beverage company is a one-night-stand investment.
Why Does a One-Night-Stand Investment Matter?
Most investors have made decisions that they eventually regret. One-night-stand investments are simply decisions that investors regret sooner rather than later, turning what are supposed to be long-term investments into short-term ones. What causes the regret can vary widely: putting too much of one's portfolio in an investment, hearing bad news about the investment, and not delivering up to earnings expectations are some examples.
One-night-stand investments are a topic that behavioral finance researchers often study.