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What Is Dead Money?

Dead money is a financial term used to refer to money that is invested and that has a little chance of getting any return. In fact, dead money may also imply impending loss. It is widely used in the world of finance, but also has similar uses in daily language. Financial experts also use a related term, dead money investment, to denote investments that have the same characteristic of not providing good chances of profit.

One can easily get caught up in a vicious cycle when it comes to dead money. The cycle may start with a person investing in funds, stocks, or bonds which do not yield a return on the investment for extended periods of time. However, some people do not think it wise to pull out of the investment due to the idea that they might still somehow be able to get their money back, with profit. However, with dead money, the chances are practically nil. That is why financial advisors almost always suggest pulling out of a dead money investment at once. This is even more crucial for investors who may not have large amounts of money, as the chances are that they will only be forced to sell at a lower price in the future anyway.

How do you avoid dead money investments? The main thing would be to be very careful when buying. You have to do research and look closely at the background of the investment. Many investments may look good on the surface, but a closer inspection might reveal otherwise.

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