Unreinvestable

Unreinvestable describes funds, earnings, or assets that are not suitable or legally permitted to be put back into a financial investment. This could be due to restrictions in the terms of the investment, the type of investment itself, or the investor's specific circumstances. Essentially, it signifies that the returns cannot be used to generate further returns within a particular context. This contrasts with investments designed for automatic reinvestment, which aims to compound returns over time, allowing the investor to earn more interest or capital gains on each period's earnings.

Unreinvestable meaning with examples

• After a bond matures, the principal is often paid out as cash, making it unreinvestable until a decision on its future allocation is made. This differs from a rolling bond that matures and is immediately put back into new bonds. Tax implications might make certain investments unreinvestable in retirement accounts.
• A company might declare a special dividend which has a one time distribution. It could be considered unreinvestable because the payout isn't incorporated into a dividend reinvestment plan (DRIP). Therefore, the individual would then need to actively choose what to do with it after the payment.
• Due to regulatory changes, a specific type of mortgage-backed security might become unreinvestable for certain institutional investors. The specific regulation may prohibit reinvestment into securities with similar characteristics. The original structure could become problematic.
• Small business owners who withdraw profits from their companies as personal income may view those funds as unreinvestable in the context of the business. They become personal cash to use, for example, for day-to-day living expenses or as part of a non-business activity.