Investing term
What is Sunk-cost?
Letting money you've already spent or lost dictate your next decision.
The sunk-cost fallacy is letting money or effort you've already spent — and can't recover — dictate your next decision. In investing it shows up as holding a losing position because of how much you've already lost, rather than judging it fresh on its future prospects. The only rational question is whether the investment is worth holding from here, regardless of what it cost you.
For example
You keep a failing stock because you've "already lost too much to sell now" — sunk-cost thinking, when the right question is whether you'd buy it today.
Sunk-cost is taught hands-on in Stage 12 — Investor Psychology: FOMO, Panic & Biases.
See the lesson →