What is a 'Free Lunch'

A free lunch is a situation in which a good or service is received at no cost, with the true cost of the good or service ultimately borne by some party, which may even include the recipient. A "free lunch" was often offered during the 1800s to bar patrons who ordered drinks as a way of bringing in more business, though in modern times the term is used to describe anything purportedly received for free. From this, "free lunch" became an investment slang term referring to unlimited riskless profits.



BREAKING DOWN 'Free Lunch'

The phrase "there's no such thing as a free lunch" is commonly used to describe situations in which investors are not able to consistently make large profits without bearing the risk of a potential loss.


For example, a free breakfast offered by a hotel to entice consumers to stay the night is not free, as the hotel room is still being paid for. Likewise, while investors can continue to make money in a bull market, there is an underlying cost - risk.

RELATED TERMS
  1. Eating Someone's Lunch

    The act of an aggressive competition that results in one company ...
  2. There Ain't No Such Thing As A ...

    An acronym that attempts to describe the cost of decision making ...
  3. Free and Clear

    A slang phrase describing the situation of someone when he or ...
  4. Free Trade

    The unrestricted purchase and sale of goods and services between ...
  5. Free Enterprise

    An economic system where few restrictions are placed on business ...
  6. Tax Free

    Tax free refers to certain types of goods and/or financial products ...
Related Articles
  1. Retirement

    Squeeze A Greenback Out Of Your Latte

    Stick to your budget every day with these 15 simple tips.
  2. Financial Advisor

    When Going 'Freemium' Works for Advisors

    Here's how advisors can incorporate free services into their businesses without giving away the store or drawing skepticism among potential clients.
  3. Investing

    Lunch With Buffett Auction Ties eBay Record

    When the amounts are tallied, it's going to be one of the most expensive meals in human history. One person has volunteered to pay nearly $3.5 million to have a private lunch with star investor ...
  4. Personal Finance

    Top 6 Best Value Hotels

    Here are the top value hotels across America, most of which can be had for less than $100 per night and less than $50 per night if booked in advance.
  5. Personal Finance

    What's Free Enterprise?

    Free enterprise is the economic term used to describe an economy with very little government ownership or regulation. In a free enterprise system, competition and the preferences and choices ...
  6. Financial Advisor

    Top Spots to Wine and Dine Clients in New York

    New York City is one the world's best places to wine and dine a client. From power lunches to sushi to celebrity chef spots, these restaurants impress.
  7. Retirement

    Picking Retirement Stocks: Dividends vs. Free Cash Flow

    Instead of focusing on dividend payments, a better metric for choosing stocks for your retirement portfolio could be a company’s free cash flow (FCF).
  8. Small Business

    3 Popular Online Services That Were Once Free

    With Flickr the latest online company announcing it will charge for content, here's a breakdown of other firms that have introduced a paywall to customers
  9. Investing

    Free Cash Flow Yield: A Fundamental Indicator

    Free cash flow can measure a business’s performance as if you’re looking at its net income line.
  10. Investing

    Buffalo Wild Wings Guarantees Lunch in 15 Minutes

    Buffalo Wild Wings (NASDAQ: BWLD) may be a top place to go and watch a game, but the lunchtime crowd doesn't have the time to kick back for that long: They need to get in, eat, and get back ...
RELATED FAQS
  1. What are some examples of free market economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement ... Read Answer >>
  2. What is the difference between a capitalist system and a free market system?

    Learn about capitalist and free market systems, how these economic systems function and the main difference between capitalism ... Read Answer >>
  3. Why have most modern nations evolved into free market economies?

    Find out why world history has been dominated by free markets since the 18th century and why that trend no longer applies ... Read Answer >>
  4. What is the difference between free enterprise and capitalism?

    Read about the differences between free enterprise and capitalism, and how it is possible to conceive of one system existing ... Read Answer >>
  5. Can I bring food and drink into the CFA testing room?

    You are not permitted to bring in or consume any food or drink in the CFA testing room. The CFA Institute put this rule in ... Read Answer >>
  6. How do I use the IRS Free File tax forms?

    Free File is a way for taxpayers to prepare and file their federal taxes online for free. The service is available to individuals ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center