Every investor and/or trader in the world will encounter a loss, and mor than once. Here's a little guide to helping young investors break free from the emotional trap of anchoring to their entry price — and make better portfolio decisions.
The Anchoring Trap: “I’ll Sell When I’m Back at Breakeven”
“I’ll sell once I’m back to breakeven.”
This kind of thinking often leads to missed opportunities, larger losses, and poor portfolio hygiene.
It feels like losing money is a mistake — so we avoid locking in a loss
We confuse hope with a plan
Ask the Right Question: Would You Still Buy It Today?
If you had no position in this stock, would you be buying it now?
Has something changed — in the company, the market, or your outlook?
That’s a mental trap.
“Great, now I can buy even more at a discount!”
You’re not trying to validate your past — you’re trying to assess your opportunity right now. Just because the stock is down doesn’t mean it’s a bargain.
What matters more is what the fundamentals and the technicals now say, given the updated market environment.
Is the company exposed to sensitive areas of the market that might be at risk?
You may have thought a certain support level would hold. But it didn’t. You may have believed in a growth trend. But new data says otherwise.
And this is easier said than done. Bias is sticky. Even experienced investors carry it. Some less, some more — but no one is immune.
Think in Terms of Opportunity Cost
Every dollar tied up in a stock that isn’t working could be used elsewhere. Even if your stock recovers, the time and capital lost may mean you missed better opportunities.
How to Let Go of Entry Bias
Go back to why you bought it. Does that thesis still hold? If not, adjust.
Price is a reflection of buyers and sellers — not your personal history.
Doubling down on a loser because it's cheaper now isn't a plan — it’s hope. Have a thesis, not a wish.
You don’t have to sell it all. Rotate part of your capital into a higher conviction idea.
It’s okay to be wrong. It’s not okay to stay wrong because of ego.
And sometimes the best move is simply saying:
Final Thought: Reset Your Mental Clock
You don’t have to hold forever. The best investors reset mentally every time they look at their portfolio.
The key question is never: “Will this get back to where I bought it?” It’s always: “Is this the best place for my money right now?”
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This article was written by Itai Levitan at www.forexlive.com. Read More Details
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