Paper Millionaire

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.

BREAKING DOWN '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. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  2. Valuable Papers Insurance

    A special type of property-casualty insurance. Valuable papers ...
  3. Paper Industry ETF

    An exchange-traded fund that invests primarily in manufacturers ...
  4. White Paper

    An informational document issued by a company to promote or highlight ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, ...
  6. Paper Money

    A country's official, paper currency that is circulated for transaction-related ...
Related Articles
  1. Personal Finance

    Why Many Millionaires Don't Feel Rich

    Learn about the millionaire mindset, and how you can benefit from millionaire market moves.
  2. Savings

    6 Millionaire Traits That You Can Adopt

    Millionaires have more in common than just their bank accounts. They share certain qualities that help them make it to the top.
  3. Savings

    Why Some Millionaires Have the Middle-Class Blues

    Recent studies show that a large percentage of U.S. millionaires classify themselves as middle class. Here's why.
  4. Entrepreneurship

    6 Millionaire Traits That You Can Adopt

    The most successful people have more in common than just money. Find out what you can learn.
  5. Personal Wealth & Private Banking

    Millionaire Households Reach Record High in U.S.

    Millionaire households in the U.S. reached a record high in 2015, a recent study by Spectrem Group has found.
  6. Savings

    5 Easy Steps To Becoming A Millionaire

    Find out some easy-to-follow tips for setting yourself up to become a millionaire.
  7. Financial Advisors

    What Millionaires Fear the Most

    How much is enough? Millionaires feel major stress over this question.
  8. Personal Finance

    Even Millionaires Go Bankrupt

    It shouldn't shock people that millionaires go bankrupt. Once you become a millionaire, there are a million ways to lose it.
  9. Financial Advisors

    Why Millionaires are Running Scared

    Most millionaires don't identify as rich and worry about maintaining their wealth. Here's why.
  10. Personal Finance

    How Not To Become A Millionaire

    Everywhere we look, millionaires are trying to push their methods of financial accumulation on us. But are they effective?
RELATED FAQS
  1. Can a business ever be too small to issue commercial paper?

    See why market forces regulate the size of companies that issue commercial paper, even though there are no official regulations ... Read Answer >>
  2. Can retail investors buy commercial paper?

    Find out whether retail investors buy commercial paper, and learn about the restrictions that often prevent individual investors ... Read Answer >>
  3. 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 ... Read Answer >>
  4. How can retail investors invest in commercial paper?

    Find out how individual retail investors can purchase short-term commercial paper, but why it rarely makes good investment ... Read Answer >>
  5. What lessons did the tech bubble crash give to investors in the Internet sector?

    Learn how investors contributed to the dot-com bust and how Internet services and investing has changed since the market ... Read Answer >>
  6. What are some examples of securities that can be found in a money market fund?

    Learn about examples of securities found in money market accounts. These securities need to be safe, liquid and of short-term ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center