What does it mean to be a bag holder on the stock market?
Definition: Bag Holder
A bag holder is a popular term used to describe an investor who holds a position in a security that decreases in value until it descends into worthlessness. Bag holders stubbornly retain their holdings for an extended period, during which time, the value of the investment goes to zero.
The expression “left holding the bag” originated in eighteenth century Britain and spread throughout the English-speaking world. In this context, a person left holding the bag is stuck with the stolen goods, taking the blame from the police while the rest of a criminal gang escapes.
In Wall Street Bets lingo this metaphor rings true. A speculator invests in a stock early and at a low price before a lot of the online discussion begins. As the stock gains popularity online others jump on board and purchase the stock. The price of the stock continues to go up, until it eventually does not. The early investor sells their shares and makes good profits. The others that bought in late are left holding the bag.
Sometimes this even hits a fever pitch, as in the case of GameStop stock. The price was rising so rapidly that everyone wanted a part. FOMO mentality to the extreme. The price rapidly descended back to Earth from new all time highs. Thousands of people were left holding the bag. Some sold their shares on the way down, while others stubbornly hold in hopes that the price may return to its previous highs.
Bag holding has two extremes. The early investor is ecstatic that they got out with gains. The late investor is self-loathing and wishing that they didn’t have an extreme moment of FOMO.
”The one time I violate my trading principles and buy a stock because I believe in the movement we are standing for, I’m wiped out. I guess someone has to be the bag holder.”
“Just call me Mr. Bag Holder.”
“I’m now a bag holder. Just a loser who got caught up in the hype too late.”