Symbolically, the investor is left holding a bag full of worthless material, representing worthless stock. The bag holder, typically, will retain an investment even though there is convincing evidence that the value will continue to drop.
There are several reasons this might happen, such as neglecting an underperforming portfolio, an investor not wanting to admit a mistake, or just plain hope that the stock will recover. Setting limits on losses and having a good exit strategy are ways to avoid this situation.
Investment dictionary. Academic. 2012.
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