One of the biggest psychological hurdles every investor faces is the tendency to get anchored to their cost basis. The moment you buy a stock, your brain latches onto that entry price as the reference point. From then on, everything you do is filtered through that lens. The problem, though, is that as a business grows and becomes more valuable, its share price usually goes up with it. At least, it’s supposed to. But when the price goes too far above your original cost basis, it starts to feel “expensive.” Even if the business fundamentals are stronger and the business is better than when you bought it, you hesitate to buy more because you’re anchored to a lower price. This is one of the most damaging biases in investing. It causes you to end up underweight in great companies that deserve a more prominent place in your portfolio. Instead of letting fundamentals determine your capital allocation decisions, you let an arbitrary historical data point—your cost basis—dictate your behavior. Overcoming that bias is one of the hardest, but also most important, psychological battles in investing. And it’s one I’m still fighting myself. What’s one stock you wish you had added more to, but didn’t because it felt "too expensive"? Let me know in the comments below! 👇
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36 Comments
Brett
@birdmanbrett · 1yr
Wish I bought more Google at 149$ 🤦♂️
Apara Chanakya@apara · 1yrEdited
Spot on with $APLD . I loaded some shares when the price was just $8. It's hard to overcome the mental barrier to buy more at $15+, even though this stock has fantastic growth prospects. I plan to keep adding more of $APLD, looking for attractive entry points in the near future.
Nathan Robert
@nathan.robert · 1yr
It never feels psychologically good to raise your cost basis. But I agree Ryne. Smart investors focus on their quantity of shares over whatever their cost basis is, if it’s a good stock like you think it is, it’ll continue to win
Max Wealth
@max.wealth · 1yr
Spot on 👌
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