Flip
Candlefocus EditorReal estate investors may benefit from “flipping” a house. The investor purchases the property and invests in the necessary repairs or upgrades, which may increase the value, before putting it back on the market. The investor must ensure the repairs and upgrades are done within the timeframe and budget goal – quickly selling the home for a profit. The gain for the investor comes in the form of capital gains if the house is held for 12 months or less.
IPO investors may also “flip” a stock shortly after it begins trading. This involves purchasing shares of the company shortly after its initial public offering (IPO) and selling the shares before the stock peaks or begins to decline. This strategy is risky, as delays in the IPO process or changes in market sentiment can cause the investor to miss out on their anticipated profits.
Macro fund managers may “flip” the asset allocation of their portfolios, by swiftly changing their positions between stocks, bonds, cash, and other asset classes. Macro fund investors typically look for long-term secular trends in the markets before adjusting their portfolios. For example, a commoditized asset class may start to show signs that it could outperform its peers, leading the macro fund manager to quickly adjust the portfolio to capitalize on any potential gains.
Overall, flipping provides investors with access to various short-term lucrative opportunities. However, flipping comes with substantial risks, as market conditions are often unpredictable, and errors in interpreting market changes can lead to large losses. Therefore, investors should proceed with caution when flipping and should also look at it as a way to diversify their portfolios.