Investing term
What is Anchoring?
Letting one earlier number — like the price you paid — drive your judgment about a current decision.
Anchoring is the mental habit of letting one earlier number quietly steer a current decision — most often the price you originally paid. That number lodges in your mind and becomes the reference point everything else is judged against, even when it's completely irrelevant to what the investment is worth now.
The market doesn't know or care what you paid; a stock is worth what it can earn from here, not what it cost you. Anchoring on your entry price is how people refuse to sell a broken investment 'until it gets back to even', holding a deteriorating business for years in service of a meaningless number. The same bias makes a stock that has fallen from $100 feel 'cheap' at $60, regardless of whether $60 is actually a fair price.
Anchoring keeps you fixated on your entry price — refusing to sell a broken holding 'until it gets back to even'. But the market has forgotten what you paid; worth is what it earns from here.
For example
You bought at $50, the business has since weakened, and it's now worth about $35 — but you refuse to sell 'until it gets back to $50', anchored to a price the market has forgotten.
Learn it by doing
That's Anchoring in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 12, Investor Psychology: FOMO, Panic & Biases).
Try the free lesson →Why it matters to you
Anchoring matters because it substitutes an irrelevant past number for the only question that counts: is this investment worth holding from here? Waiting to 'break even' keeps money trapped in poor investments long after the case for them has gone, and treating a fallen price as automatically cheap invites value traps. Recognising your entry price as emotionally sticky but financially meaningless is what frees you to judge a holding on its actual prospects.
⚠ Refusing to sell until you 'break even'
Holding a losing investment purely to avoid selling below your purchase price anchors your decision to a number the market ignores. The business may never recover, and the money stays trapped while better opportunities pass. The rational question is whether the investment is worth holding from today's price — not whether it has returned to what you paid.