A dash to trash is a period of overbuying of low-value securities. Investors may believe they are buying into the market or setting up good long-term positions by flocking to securities they think are undervalued. The result can be a price inflation, and may potentially result in a speculative bubble. Once the market stabilizes, the worth of the securities may decrease, and could leave investors in a vulnerable position. This particular trend is seen most commonly in bull markets, those that appear to be moving in an upward direction.
Like other investment fads, a dash to trash can be triggered by a relatively small but influential number of investors. They may analyze securities, decide they are undervalued, and start buying them up. Other investors pay attention and decide they need to take positions in the market, which starts to push prices up. Sellers learn that they can hold out for high offers, and buyers feel validated in their belief that the securities were undervalued on the basis of the rising price.
The issue with a dash to trash, as implied by the name, is that the securities may not be worth very much. It’s possible they will perform well in the short term, but in the long term, they may not be undervalued. Savvy investors who identify the point where the price peaks may be able to get out of the position and come away with a profit. Others may end up holding the bag, an expression used to describe people trapped with poor investments because they didn’t recognize dangerous market trends. In a dash to trash, people may be left with worthless securities.
Speculation is a key part of engagement in the market, and sometimes speculative buying ends in wins for the investor, while in others, it can create risks. Investors evaluate the risks and benefits of potential purchases and weigh them against market activity as a whole to decide on the best move. In some cases, a dash to trash may be deceptive, and investors could be convinced that a security is a good buy and will position them well for the future. When reputable investors are involved, the pace of speculation can increase, and so can the inflation of the value.
People concerned about being caught up in a dash to trash can use several tactics to reduce risks. One is to research prospective purchases carefully. If a new stock looks hot, rather than relying on what other investors are doing and statements from commentators, investors could do their own research. Annual reports are available to the public, as is news that might explain a sudden surge of speculation.
