Kicking the Tires: Meaning, Examples, Pros & Cons

What it means

“Kicking the tires” is a colloquial term for performing only a minimal, cursory review of an investment instead of conducting full due diligence. The phrase evokes a car shopper who walks around a vehicle and taps the tires rather than inspecting the engine or comparing models—suggesting interest but not commitment.

What it typically involves

Investors who are “kicking the tires” generally perform quick, surface-level checks such as:
* Skimming the company’s annual report or headline financials (revenues, earnings).
* Comparing a few simple valuation metrics (e.g., price-earnings ratio) against peers.
* Scanning price charts or basic technical patterns for recent trends.
* Reading news articles or marketing materials rather than regulatory filings or deep analysis.

This behavior can apply across asset types: stocks, bonds, mutual funds, hedge funds, closed-end funds, CDs, money market instruments, private equity and real estate.

Examples

• A potential hedge-fund investor reads the fund’s marketing brochure but doesn’t review the manager’s regulatory or disciplinary history.
• Someone shopping for a 12‑month certificate of deposit compares headline interest rates online but skips the fine print on early-withdrawal penalties or automatic rollover terms.

Pros and cons

Pros
* Fast way to screen and discard clearly unsuitable opportunities.
* Useful as an initial step to identify ideas worth deeper research.
* Saves time when you need to prioritize where to focus limited research resources.

Cons
* Incomplete analysis can miss important risks (fees, lockups, weak governance, regulatory history).
* May lead to poor or impulsive investment decisions based on headlines or marketing.
* Repeatedly skimming many opportunities can waste time without producing actionable choices.

How to move beyond “kicking the tires”

If an opportunity merits more attention, move from a cursory check to structured due diligence:
* Establish screening criteria (size, sector, valuation, risk parameters) to narrow the universe.
* Read primary documents: prospectuses, regulatory filings, audited financial statements.
* Verify background: management track record, litigation or regulatory history.
* Analyze fundamentals: cash flow, balance sheet strength, competitive position.
* Understand costs and restrictions: fees, redemption terms, lockups, automatic rollovers.
* Compare to peers and consider scenario and sensitivity analyses.

Key takeaways

• “Kicking the tires” is a quick, preliminary review—not a substitute for due diligence.
• It’s a practical initial screening tool but carries risk if relied on exclusively.
• Use it to triage ideas, then apply disciplined research and clear criteria before investing.