This post is part of our Portfolio Alpha series where we help investors understand how to find and optimize tax, fee, and performance inefficiencies of their portfolios. We discuss what Dead Cash is, how it impacts a portfolio, and what a self-directed investor can do to help mitigate its effects.
Dead Cash is unintentional cash buildup held in portfolios that is not being invested. This creates a cash drag on the portfolio, lowering long-term returns. There are numerous reasons this situation comes up such as automatic contributions that weren’t invested, dividends that aren’t being reinvested, etc.
It’s important to regularly check for these positions and make sure you are investing excess cash intentionally against your long term investment plan and aren’t (literally) leaving money on the table.
Dead cash could cost larger portfolios thousands a year
Let’s bring this to life with a quick, illustrative example for a $3m portfolio. The table below shows:
- How much dead cash (col 2) is sitting in the portfolio at different assumed % rates of dead cash (col 1)
- How much that dead cash returns each year at varying rates:
- 0.5% – hypothetical, default low-yielding cash position in an account
- 3.9% – the 30d SEC yield as of November 19, 2025 on the iShares 0-3 Month Treasury Bond ETF (ticker: SGOV)
- 9.0% – hypothetical long-term expected return of a diversified portfolio
Table 1: Illustrative Dead Cash Drag On A $3m Portfolio
| % of portfolio in dead cash | $ portfolio in dead cash | Yrly $ return of dead cash at 0.5% | Yrly $ return of dead cash at 3.9% | Yrly $ return of dead cash at 9.0% |
| 0.5% | 15,000 | 75 | 585 | 1,350 |
| 1.0% | 30,000 | 150 | 1,170 | 2,700 |
| 1.5% | 45,000 | 225 | 1,755 | 4,050 |
| 2.0% | 60,000 | 300 | 2,340 | 5,400 |
For educational purposes only. All returns and results are hypothetical and do not include the impact of taxes or advisory fees. Individual results will vary based on factors such as positions held and size of portfolio. Past performance is not indicative of future returns. Investing involves risk, including the loss of capital
This table reveals the opportunity costs of letting dead cash sit uninvested in a portfolio.
On the low end, $15,000 of uninvested dead cash yielding $75 a year could at least be reinvested into a higher-yield cash equivalent position like SGOV to yield $585 instead. A difference of $510. Not a huge difference, but it at least pays for a nice date night including childcare.
On the higher end, $60,000 in dead cash yielding $300 a year could be reinvested into a diversified portfolio strategy with a historical 9.0% a year in returns equating to $5,400. A much larger difference of $5,100 which could pay for a multi-day family vacation.
These are purely illustrative examples, you can and should do your own calculations to understand the impact of any dead cash on your portfolio.
But the takeaway should be clear: don’t let dead cash sit unutilized.
Self-managing dead cash
There are a few tips and tricks for managing dead cash positions if you’re a self-directed investor:
- Check for dead cash regularly: Make it a part of your monthly or quarterly planning and budget management process to check your investment accounts for dead cash
- Update your default cash position: Some brokerages let you select what your default cash position will be held in (often called a core position). For example, Fidelity offers SPAXX, a Government Money Market Fund, as a core position option in many of their accounts. This has a 7-day yield of 3.59% as of November, 20, 2025. This helps ensure that if you’ve forgotten to check your dead cash for awhile that it will at least be invested in a reasonable yielding position by default.
- Set up automatic investments: Some brokerages allow you to set up automatic investments of your contributions and / or your dividends. That means any cash that hits your account will go towards your specified allocations so you don’t need to worry about dead cash.
Options are different across brokerages so be sure to check to see what yours offers and reach out to a qualified financial advisor if you’re unsure about what to do.
Our advisors use our Alpha platform to systematically optimize dead cash positions
We’ve incorporated Dead Cash Optimization into our Alpha platform’s Portfolio Diagnostic module. This helps our advisors systematically check for and quantify the impact of any dead cash positions on portfolios when we onboard new clients. Our advisors then work with these clients to optimize how we use this dead cash to best meet overall financial goals.
The rest of our portfolio management tools and processes help us minimize dead cash on any portfolios we’re actively managing for clients on an ongoing basis once a client is onboarded.
Reach out to us to schedule a complimentary, 30-minute Lightweight Portfolio Diagnostic if you’re interested in quantifying the impact of cash, tax, or fee drags on your portfolio’s performance.
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Disclosures:
This content is for educational purposes only and is not investment, tax, or legal advice. Employees and clients of Kangpan & Co. may hold positions in securities discussed in this post. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.
Kangpan & Co. 