Anchoring: Relying Too Much on Initial Information Anchoring is when an investor focuses on an initi
Anchoring: Relying Too Much on Initial Information
Anchoring is when an investor focuses on an initial piece of information, for example, the price at which they bought an investment, and allows it to unduly influence future decisions.
Impact on Investing An investor may purchase a stock at $100 per share and refuse to sell the stock even if it decreases to $50 per share; they are anchored to their original purchase price. They believe it will return to that value or higher, regardless of a change in market conditions or the business fundamentals.