Definition of Investing New Money or Old Money

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Investing old money is defined as using money that is already being traded in a variety of secondary market accounts, while investing new money means that recently deposited money is being used for the investment. Learn how investing new money generally involves less hassle with information from an investment portfolio manager in this free video on investing and personal finance.

Part of the Video Series: Investing & Retirement Funds
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Video Transcript

So, what's the difference between investing old money versus new money? Old money would be the money that you would have in your account, and may already be involved in the secondary market. You may already be trading with that money. So invest that money, you've got to free it up, and that means you'll have to sell the right securities, hopefully at a gain. And once those assets are liquid, then you can reinvest, and buy more securities. If you've got new money, new money going into the account, that money is liquid from the get-go. You don't have any trading to do before you do your investing, so, that's much easier. So a lot of people will want to buy a position, hold on to that money, hold on to that position, and let it grow over a period of time. And that would be your old money, and, in the same way, a lot of people, what they want to do is hold those positions, bring in some new money, and invest further, and grow the account. But, if you're in a situation where you want to use some of the assets that are already invested, you'll need to do some trading and get that old money now freed up and liquid, and then you can invest again.

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