Bag Holder

It is the term used for investors who are stuck with some kind of worthless funds, or asset classes for investment like commercial real estate, or capital alternative investments.

The term indicates the person is left holding the bag or you are in the possession of an asset or security with decreasing value, where at one time it may become completely worthless example – In real estate if you spend more on renovations without having any earnings, or in stock investments, where the price is fraudulently inflated by the firm to attract investors and later, the share becomes completely worthless. 

Investors do not plan to become bag holders and they need to be careful to avoid holding assets that are showing such signs. They should try to gather information and look for messages before buying it.  

If you are holding a short-term investment for a long and if its price continues to decline, and if the owner holds positions with the hope that, sometime, the prices will bounce back, shows you to be a bag holder.

The phenomenon has been related to the prospect theory where the individual makes assumptions based on perceived gains instead of perceived losses.

Sunk costs refer to the irrecoverable expense, that has already happened and it is a reason that can make a person hold on to it.