Reviewed by Aug 26, 2020| Updated on
A stock or security which is underperforming as compared to its relative benchmark or peers is called a laggard. A laggard will have a low average return than the market.
A laggard is opposite of a ladder. Investors usually want to avoid investing in laggards because they achieve less-than-desired rates of return. If an investor holds laggards in their portfolio, they are generally the first ones to sell.
Factors to Consider Before You Invest
In broader terms, laggard connotes resistance to rising and a persistent falling pattern.
The reason for a laggard’s underperformance is specific to the company.
Investors may mistake a laggard for a bargain, but it carries a huge risk.
A laggard is one stock that returns 2% instead of another stock that returns 5% and costs the investors 3% each year.