Paper Millionaire

AAA

DEFINITION of 'Paper Millionaire'

An individual who has achieved a high net worth as a result of the large total market value of the assets he or she owns. This phenomenon usually occurs when investors buy marketable securities that are later bid up to much higher prices on the open market. While this creates large amounts of "paper profit", the paper millionaire's riches usually aren't safe until these holdings are liquidated.

INVESTOPEDIA EXPLAINS 'Paper Millionaire'

It is important to note that paper millionaires are not the same as true millionaires, which generally refers to people who have more than $1 million in cash in the bank.

For example, consider a hypothetical investor during the 1990s technology bubble who invested in startup dotcom companies. Assuming that none of this investor's shares is sold, he or she would have become a paper millionaire, as recorded on the brokerage statement, despite having very little cash in the bank.

However, once the dotcom bubble burst, technology stocks saw their share prices collapse, and former paper millionaires once again found themselves poor, owning only pieces of paper (i.e. share certificates) that were no longer worth the millions of dollars at which the market had previously valued them.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Paper Profit (Paper Loss)

    Unrealized capital gain (or capital loss) in an investment. It ...
  3. Dotcom

    A company that embraces the internet as the key component in ...
  4. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  5. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
  6. Liquidity

    1. The degree to which an asset or security can be bought or ...
Related Articles
  1. Investing Basics

    Digging For Profitable Delistings

    Deregistration can provide opportunities for savvy investors. We'll show you how to cash in.
  2. Options & Futures

    How Much To Save To Become A Millionaire

    With a little discipline and the help of some powerful savings vehicles, anyone can hit this mark.
  3. Savings

    Retiring: Is $1 Million Enough?

    Find out why this magic number has lost some of its lustre as a retirement savings target.
  4. Retirement

    What was the millionaire boom?

    When Ronald Reagan took office in 1981, he brought in an agenda to try and clear the remnants of stagflation that plagued the nation in the 1970s. His strategy, referred to as Reaganomics, was ...
  5. Investing

    What are unrealized gains and losses?

    An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large loss remains unrealized, the investor is probably hoping the stock's fortunes ...
  6. Investing

    How are realized profits different from unrealized or so-called "paper" profits?

    When buying and selling assets for profit, it is important for investors to differentiate between realized profits and gains, and unrealized or so-called "paper profits".Simply put, realized ...
  7. Options & Futures

    10 Steps To Retire A Millionaire

    Making this dream come true takes work, but it's well worth the effort.
  8. Fundamental Analysis

    Paid-Up Capital

    Paid-Up Capital is listed in the equity section of the balance sheet. It represents the amount of money shareholders have paid into the company by purchasing shares. It’s essentially two accounts, ...
  9. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  10. Trading Strategies

    Under what circumstances is short selling advisable?

    Find out when short selling a stock is profitable and what an investor should keep in mind before deciding to pursue a short sale investment strategy.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center