Let’s play a quick game.
Imagine you bought a stock at $100 a share. Today, it’s trading at $87.
Would you sell it?
Most people would say, “No way. I’m waiting until it gets back to $100.”
But here’s the thing — that original price? It’s irrelevant. The market doesn’t care what you paid.
That’s Anchoring Bias at work.
What is Anchoring?
Anchoring is a mental shortcut where we rely too heavily on the first piece of information we receive — and then use it as the “anchor” for all future decisions.
In everyday life, it shows up like this:
- You see a $300 jacket marked down to $199 and think you’re getting a deal — even if $199 is still overpriced.
- A friend tells you their house appraised for $600,000, so now you assume yours must be close… even though you live in a different neighborhood.
And in investing? Anchoring can quietly lead us off course.
How It Shows Up in Portfolios
Here are a few classic examples of anchoring in action:
- Refusing to sell an underperforming investment because “I paid more for it.”
- Overvaluing a stock because it was trading higher last year, even if the fundamentals have changed.
- Fixating on a target price that was never realistic in the first place.
The anchor becomes the benchmark — even if it’s arbitrary.
And over time, this can lead to:
- Holding onto losers too long
- Missing better opportunities
- Making decisions based on emotion, not data
Why It’s So Sneaky
Anchoring feels logical. After all, we all want to make smart, rational decisions.
But the truth is, our brains love shortcuts — and anchoring is one of the most common ones. Especially when there’s uncertainty, we cling to the first number we heard. It gives us a sense of control… even if it’s leading us astray.
How to Break Free from Anchoring
Here are a few quick ways to keep this bias from messing with your money:
- Ask, “Would I still make this decision if I didn’t know my original price?”
- Focus on current value and future potential, not past prices
- Get outside perspective — sometimes a second set of eyes helps shake us loose from old anchors
And if you work with a financial advisor, they should help reframe these decisions using data, context, and strategy.
🧠 Want to hear how this plays out in real life?
🎙️ This week’s podcast episode dives into how anchoring bias shows up in real portfolios — and how to coach yourself (or your clients) through it.
🎧Listen to From Wall Street to Your Street – When Your Past Price is Holding You Back (New episode drops Friday!)
Because the numbers that matter most… aren’t always the ones you started with.