Definition of Take a Bath
By Dave Manuel
What is the definition of "taking a bath" as it applies to the stock market? What does it mean to "take a bath"?
If you have watched the movie Wall Street (and who hasn't), then you probably remember the character Marv uttering the line "Boy, we sure took a bath on that ugly *@#$@!"
To "take a bath" on an investment means to suffer a very large loss.
Example 1: An investor buys 10,000 shares of GM at $1.00, incorrectly figuring that the government will never allow to company to actually go bankrupt.
The common shares of GM proceed to tank as bankruptcy inches closer, and the investor is forced to take a very large loss.
He tells his friends that he "took a bath" on his General Motors trade.
Example 2: Investors who bought at the top of the dot-com boom in the late 90s / early 2000s were forced to "take a bath" on their investments, which led many to avoid the stock market altogether for at least 4-5 years.
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