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. Is the Dow Jones a stock exchange?

    Learn about the Dow Jones Industrial Average and its impact. This historically significant index provides a daily snapshot ...
  2. Is the Dow Jones a public company?

    Find out how the Dow Jones Industrial Average tracks the health of the U.S. economy. This fluctuating number indicates the ...
  3. What do traders' hand signals mean on the trading floor?

    Stock market traders use a series of hand gestures to communicate with runners in the pit. There are nine common hand gestures ...
  4. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ...
RELATED TERMS
  1. International Finance Corporation

    The International Finance Corporation is an organization dedicated ...
  2. Bidder

    The party offering to buy an asset from a seller at a specific ...
  3. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position ...
  4. Registration Right

    A right which entitles an investor who owns restricted stock ...
  5. Float Shrink

    A reduction in the number of a publicly traded company’s shares ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value ...
comments powered by Disqus
Related Articles
  1. Wall Street's Enduring Impact On The ...
    Investing Basics

    Wall Street's Enduring Impact On The ...

  2. The Handy Guide To Global Stock Market ...
    Markets

    The Handy Guide To Global Stock Market ...

  3. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

  4. The Basics Of Outstanding Shares And ...
    Investing Basics

    The Basics Of Outstanding Shares And ...

  5. Narrow Your Range With Stop-Limit Orders
    Investing Basics

    Narrow Your Range With Stop-Limit Orders

Trading Center