The Comprehensive Guide to

Passive Income Investing

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What is a Laggard?

Laggard describes a stock that fails to perform as well as the overall market or a group of peers.

How Does a Laggard Work?

In a broad sense, the term laggard connotes resistance to progress and a persistent pattern of falling behind. In a financial sense, a laggard may be a stock or other market-traded security that has historically underperformed on a consistent basis. For example, if biotechnology stock ABC consistently posts annual returns of only 2% when other stocks in the industry post average returns of 5%, stock ABC would be considered a laggard.

Why Does a Laggard Matter?

If you hold them in your portfolio, laggards are generally the first candidates for selling. In the example above, holding a stock that returns 2% instead of one that returns 5% costs you 3% each year. Unless there is some solid reason to believe that a catalyst will lift shares of a stock that has historically lagged its competition, continuing to hold the laggard costs you money.

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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.