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Barchart
Jim Osman

Shielding Your Portfolio: Spinoff Stocks As A Risk-Resilient Strategy

There is no such thing as a risk-free investment. There is a degree of risk you assume and there are methods of negating risk. In terms of risk and return, the ultimate objective of investing is to generate the highest possible return for a given level of risk. This can be accomplished by diversifying your portfolio across asset classes, industries, and regions, and by investing in assets that have the potential to outperform the market over the long term.

One of the places I look for high returns with a lower degree of risk is in the Spinoff space (company breakup.) A company breakup, also known as a corporate breakup or corporate divestiture, is the decision by a large corporation or conglomerate to Spinoff a portion of its business units, subsidiaries, or assets. Typically, this is done to establish smaller, more focused businesses or to unlock the value of specific divisions that may not align with the core business strategy. You may have seen these companies randomly appear on your account out of nowhere. They are those additional companies you gain whether you like them or not from having an existing position in a parent company going through the Spinoff. 

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