What is ‘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.
Explaining ‘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.
Further Reading
- Paper millionaires: How valuable is stock to a stockholder who is restricted from selling it? – www.sciencedirect.com [PDF]
- The transformation of business finance into financial economics: The roles of academic expansion and changes in US capital markets – www.sciencedirect.com [PDF]
- Millionaire investors: financial advisors, attribution theory and gender differences – www.tandfonline.com [PDF]
- Millionaires and the public in Czech politics – www.tandfonline.com [PDF]
- The role of billionaires in the economic paradigm of the 21st century – www.ceeol.com [PDF]
- Cultural economics of TV programme cloning: or why India has produced multi‐“millionaires” – www.emerald.com [PDF]
- Improving economic and financial education: A program for urban schools – go.gale.com [PDF]
- Who wants to be a millionaire? Nigerian youths and the commodification of kidnapping – www.tandfonline.com [PDF]
- Who Wants to be a Millionaire? A Behavioral Economy Analysis*' – books.google.com [PDF]
