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. The market doesn't know or care what you paid; a stock is worth what it can earn from here. Anchoring on your entry price is how people refuse to sell a broken investment "until it gets back to even."

For example

You bought at $100, it's now $60 on bad fundamentals, but you hold on waiting for $100 — anchored to a number that has nothing to do with the stock's future.

Anchoring is taught hands-on in Stage 12 — Investor Psychology: FOMO, Panic & Biases.

See the lesson →

Related terms

Base rateThe long-run average probability of an event, before you weight any recent evidence.Confirmation biasReading the things that agree with you and ignoring the things that don't.Disposition effectSelling winners too early to lock in gains and holding losers too long to avoid realizing the loss.HerdingDoing what everyone else is doing because everyone else is doing it.
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