What is dead money?

By Chizoba Morah AAA
A:

Dead money is a common term used on Wall Street to describe money that does not earn a return for an investor. It could be money stashed in a mattress, non-interest yielding checking account or a security that does not yield returns. Any money or investment that does not grow or yield gains for the investor is usually referred to as "dead money".

When an investor invests in securities, the expectation is that the security or investment will yield some profitable returns. When an investment is not expected to yield any returns for the investor, the investment is referred to as a 'dead money investment'. Examples of dead money investments are shares or stocks of companies that are not expected to improve or appreciate past their current price. Like everything else, what an investment a trader or investor considers dead money might be considered profitable by another trader or investor depending on whether they want the stock to go up or down.

Finally, when an investment drops more than 80% in value, with no upwards movement for a few years, that stock is classified as "dead money stock".

This question was answered by Chizoba Morah.

RELATED FAQS

  1. What is the difference between technical analysis and fundamental analysis?

    Learn about technical analysis and fundamental analysis, the difference between the two methodologies and how they are used ...
  2. How did the stock market operate prior to the Securities and Exchange Commission?

    Read about the early stock exchanges in the United States, how corporations issued their shares through brokers and why railroads ...
  3. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares and why investors might value them more than common ...
  4. What are the most common interview questions for banking / finance jobs?

    Prepare for an important interview by rehearsing with commonly asked questions for job candidates in the banking / finance ...
RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Einhorn Effect

    The sharp drop in a publicly traded company’s share price that ...
  3. Institutional Ownership

    The amount of a company’s available stock owned by mutual or ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  5. Acquisition

    A corporate action in which a company buys most, if not all, ...
  6. International Finance Corporation

    The International Finance Corporation is an organization dedicated ...

You May Also Like

Related Articles
  1. Stock Analysis

    The World's Top Ten News Companies

  2. Forex

    What Is Online Trading Academy?

  3. Investing Basics

    Why did Berkshire Hathaway create Class ...

  4. Stock Analysis

    Buyinb Facebook Stock, A Beginner's ...

  5. Investing News

    Alibaba's Top Competitors

Trading Center