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Enron is an example of a bag holding stock. The company’s share price declined from a high of $90 in 2000 to $0.12 two years later due to a series of dubious accounting practices.

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Conducting sufficient research on an investment before investing is key to avoiding becoming a bag holder. It generally involves doing a deep dive on the company’s fundamentals, determining the attractiveness of the company’s competitive landscape, and its prospects for success.

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The field trial ran from April 1, 2023, to Dec. 31, 2023, and consisted of participating officers from the RCMP “E” Division, and officers from the Vancouver, Victoria and Port Moody police departments. The results of the field trial found the Taser 7 was effective, and no serious injuries or deaths among subjects, officers or bystanders were reported.

The approval process for Taser 7 included convening a multi-disciplinary panel to provide advice to the director of Police Services with consideration of a range of expertise and perspectives.

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B.C. amended the Police Act in 2012 to develop police standards on CEWs and set out a process for provincial approval of intermediate weapons or restraint devices in keeping with the recommendations of the Braidwood Commission.

After thorough review of the Taser 7’s functionality and safety considerations, the panel unanimously recommended a field trial of the CEW, which was then authorized by the director of Police Services.

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Although any type of investor can become a bag holder, it is commonly understood that retail investors with limited investing knowledge are more likely to become one. It is because they may invest in securities based on word of mouth without doing their own due diligence.

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A bag holder is a financial slang used to describe an investor who holds on to poor-performing, or worthless, investments. Bag holders tend to stubbornly hold their losing investments for an extended period instead of cutting losses.

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For example, a significant number of retail investors became bag holders in meme stocks due to (1) their lack of research on the securities they were purchasing, (2) the “fear of missing out” (due to significant social media hype), and (3) the inability to develop an exit strategy when their securities started declining in value.

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The panel had representatives from various organizations, such as the Independent Investigations Office, Alliance of BC Modern Treaty Nations, LabTest Certification (conducted energy weapon [CEW] testing contractor/laboratory), British Columbia Schizophrenia Society, Victoria Police Department, RCMP “E” Division and Vancouver Police Department.

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One of the main reasons why investors become bag holders is that they are unwilling to acknowledge a poor trade and realize a loss. Investors do not enjoy losing money on their trades (attributable to the loss aversion bias), and when their investments start declining in value, they stubbornly keep holding in hopes that they will eventually generate a gain or at least break even.

To learn more about B.C.‘s provincial policing standards, visit: https://www2.gov.bc.ca/gov/content/justice/criminal-justice/policing-in-bc/policing-standards

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Such behavior is commonly referred to as the disposition effect, defined as the tendency for investors to hold onto losing trades for too long, and exit profitable trades too quickly, where people avoid realizing paper losses but seek to realize paper gains.

Thank you for reading CFI’s guide to Bag Holder. To keep advancing your career, the additional CFI resources below will be helpful:

Of course, there may be unexpected events that can cause a company’s share price to deteriorate (for example, a black swan event). As a result, it is also essential to develop an exit strategy (such as a stop-loss price) for the investment in question.

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Dec 10, 2008 — Taser International is responding to moves by several Canadian police agencies to pull some stun guns off the streets for testing following ...

The Taser 7 is now authorized for use in B.C., and has been in use in Ontario, Quebec, Nova Scotia, New Brunswick, Saskatchewan and Alberta.

Apr 21, 2011 — Tasers are hand-held weapons that deliver a jolt of electricity through a pair of wires propelled by compressed air from up to 10.6 metres ...

At the conclusion of the field trial and based on the results, the minister of public safety and solicitor general approved amendments to the standards on CEWs. The panel has recommended several conditions to ensure that all police agencies in B.C. update their CEW training programs and adjust their CEW internal policies and procedures to align with provincial standards on CEWs.

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A theory is that the term “bag holder” dates back to The Great Depression, when people in the queues of soup kitchens and breadlines were holding potato bags. The term’s since been expanded to the modern-day investment dictionary to refer to people who hold poorly performing or worthless investments.