Key idea
We fixate on a specific number, what we paid, a past high, and let it drive decisions it should have no part in.
Anchoring is the mind's habit of latching onto a reference number and judging everything against it. In investing, the most common anchor is the price you paid, or a peak the asset once hit. That number then distorts sensible decisions.
How anchoring traps investors
"I will sell once it gets back to what I paid." "It was once ₹500, so ₹300 is cheap." Both are anchoring. What you paid is irrelevant to whether an investment is good from here; the market does not know or care about your purchase price. Waiting to "break even" on a poor investment keeps money trapped in it for the wrong reason.
Your buy price
the market ignores it
A past high
says nothing now
What matters
its prospects from here
The reframe
The right question is never "what did I pay?" but "given everything I know today, is this a sound place for my money going forward?" Answering that honestly, ignoring the anchor, is how good investors decide whether to hold or move on.
Your purchase price is history. Judge every holding on its future prospects and its fit with your plan, not on a number that only matters to your ego.
Finished reading?
Marking this complete counts today, and your streak becomes day 1.