What is 'Dash to Trash'

Dash to trash is what happens when investors flock to a class of securities or other assets, bidding up prices to a point beyond what can be justified by valuation or other fundamental measures.

BREAKING DOWN 'Dash to Trash'

Dash to trash is an occurrence where a group of investors bid up prices of a group of securities beyond a point that can reasonably be justified by looking at the assets’ financial state or recent history. This process pushes up the price of stocks for lower-value companies.

While the dash-to-trash effect can occur within any type of security, the phrase is typically used to describe low-quality stocks and high-yield bonds, both of which can be subject to periods of overbuying in the markets. 

An example: the Smith Corporation has been losing money for several years, holds few assets of significant value and seems to be hampered by ineffective leadership. The stock has a recent history of trading at $5 per share, but some sudden event has the company in the news and trending, so a bunch of investors rush to invest in the company, and pay $10 per share even though the current book value is just a fraction of that.

Factors Prompting a Dash to Trash

As the name graphically implies, investors are buying low-quality assets or assets that do not correctly price in the risks associated with them. The dash to trash often occurs near the end of a prolonged bull market, when investors begin to seek higher returns regardless of the risks involved. The longer it has been since a market downturn, the more likely it becomes that large pockets of investors will feel bulletproof. So the dash to trash phenomenon is often a symptom of investors becoming overconfident, and thus becoming more comfortable with taking bigger risks than they might be during other times when they might tend to be more cautious and risk-averse.

This occurrence often involves a sort of herd mentality, where a mass of investors tends to act as a group and implement a collective movement that drives up the prices of a certain group of securities.

Dash to trash can also happen in an environment where returns are generally low, and investors are so eager to achieve any type of positive returns that they are willing to make higher-risk moves.

In the end, investors who are involved in a dash to trash often will later regret their decision, when in the end they find that they are holding stocks with little or no value.

  1. Asset Class

    A group of securities that exhibit similar characteristics, behave ...
  2. Bidding Up - Securities

    Bidding up is the act of increasing the price an investor is ...
  3. Justified Wage

    A justified wage refers to income determined by market dynamics, ...
  4. Best Bid

    Best bid is the highest quoted bid for a particular security ...
  5. Instamine

    Instamining is the process of dramatically simplifying the mining ...
  6. Portfolio Return

    Portfolio return is the gain or loss achieved by a portfolio. ...
Related Articles
  1. Tech

    What Is Dash Cryptocurrency?

    Dash, a cryptocurrency which began as a privacy-focused coin, has since transitioned into a medium for daily transaction.
  2. Tech

    How to Buy Privacy-Focused Cryptocurrencies Dash and Monero

    Here's how to buy Dash and Monero, two privacy-focused cryptocurrencies.
  3. Tech

    The Five Most Private Cryptocurrencies

    Investopedia's list of private cryptocurrencies that claim to offer enhanced security and protection of user identity.
  4. Investing

    How Will Trump’s Victory Boost Silver? (SLV, SILV)

    All eyes are on gold, but silver is an overlooked asset in the days of President Trump.
  5. Tech

    What Are the 10 Most Important Cryptocurrencies Other Than Bitcoin?

    Altcoins present themselves as modified or improved versions of Bitcoin. With Bitcoin prices being volatile, we think you should keep an eye on these 10 alternatives.
  6. Personal Finance

    7 High-Paid Public Service Jobs

    Some public service jobs pay far above the national average, and also come with good benefits and job security.
  7. Investing

    Why Investors Care So Much About a Sale of E*Trade

    E*Trade's acquisition of Trust Company of America is dashing hopes of the company selling itself after being dealt an ultimatum in June.
  8. Investing

    Why Asset Allocation Is Important

    Proper asset allocation results in diversification which increases potential gains and reduces risk.
  9. Investing

    3 Ways to Prepare for a Market Downturn

    No one knows when a market downturn will occur or how long it will last, so it pays to be prepared.
  1. Common examples of marketable securities

    Learn about marketable securities and the most common types of debt and equity securities, including common stock, bonds ... Read Answer >>
Trading Center