The Comprehensive Guide to

Passive Income Investing


Learn the secrets of how Paul Tracy generates over $XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

What is a Bag Holder?

A bag holder is a person whose investment has become worthless or almost worthless. The investor is left 'holding the bag.'

How Does a Bag Holder Work?

For example, let's assume that John invests $10,000 in Start-Up Company. About 500 other investors also invest in the new corporation.

Start-Up Company develops and takes its first product to market, but the product bombs and the company needs to raise some cash. It sells assets, lays off workers, and downsizes considerably. It also misses several debt payments and damages its credit rating, making it very hard and expensive to borrow. Eventually the company files for bankruptcy and it sells its assets to repay creditors, leaving shareholders with virtually nothing.

If John held his investment all the way from $10,000 to $0, he is a bag holder.

Why Does a Bag Holder Matter?

Nobody wants to be a bag holder, but there are plenty of ways investors can become bag holders. This is why investors must take precautions to mitigate risk, such as reading financial statements, listening to conference calls and identifying the red flags that indicate it's time to sell an investment.

Ask an Expert about Bag Holder

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Bag Holder.

Be the first to ask a question

If you have a question about Bag Holder, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.