Implementation shortfall

Okay kiddo, let me explain implementation shortfall to you in a simple way. Imagine you have some money and you want to buy something very important. Let's say you want to buy a bicycle.

Now, you have two options: you can either buy the bicycle right away at any cost, or you can take some time to find the best deal and the best price for it. If you choose the second option, you might be able to get a better deal on the bicycle, but it's going to take some time.

Implementation shortfall is a lot like this, but instead of buying a bicycle or anything else, we’re talking about buying and selling stock. When you buy or sell stock, you want to get the best price possible for it. You also want to buy or sell it quickly so that you don't miss out on any potential gains.

However, it's not always easy to get the best price when you're buying or selling stock. Sometimes, the price changes very quickly, and it's hard to keep up. Other times, there might not be enough buyers or sellers to give you the price you want.

This is where implementation shortfall comes in. It’s the difference between the price you paid for a stock and the price you could have paid if you had more time or a better market situation.

For example, let's say you want to buy 100 shares of a company’s stock, and you have a specific price in mind that you want to pay for it. If the price is going up very quickly, you might not be able to get the shares at the price you want. You might end up paying a higher price than you intended, and that’s your implementation shortfall.

On the other hand, if you take too long to buy the stock, the price might go up even more, and you might miss out on any potential gains. That’s another implementation shortfall.

So, implementation shortfall is the difference between the price you actually paid for a stock and the price you could have paid if other market circumstances were more favorable.