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.

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