Fire Sale

Back in the day, a fire sale used to be exactly what it sounds like: the sale of stuff that had been damaged by fire. Pretty self-explanatory. Today, though, it usually refers to the sale of discounted goods by a company that is in serious financial distress.

For example, a restaurant that is going out of business might sell off a bunch of its kitchen equipment at super-low prices in an effort to recoup some of its financial losses.

But fire sales aren’t just for commercial-grade freezers; they can also refer to the stock market. In bad economic times, the stock market doesn’t tend to perform as well. Some securities end up trading at much lower vales than they might otherwise; this is what a stock market fire sale looks like.

For anyone looking to pick up the discounted commercial-grade freezer version of securities, fire sales can present a great buying opportunity. But they can also be risky—there’s no guarantee that securities we buy at fire sale prices will go back up.