Of all the psychological mental blocks, this one is one of the hardest to undo even if we are fully aware of it.
Sunk cost fallacy
Have you ever been in a movie where after the first half-hour you realised the movie is crap. What do we do? We stay till the boring ending when it would make better sense to just walk-out of the cinema. No? We have already paid for the tickets right?
How about that not so cheap shirt or blouse that we bought but it does not quite fit us now because we’ve gained some weight? That shirt or blouse is in the cupboard gathering dust as we tell ourselves we can wear them again when we lose weight. Yeah right!
Then there is that girl or boy you have been dating for 7 years now. You realised deep inside he or she is not that right for you… But to admit the 7 years have been a mistake is too much of a emotional baggage to let go. So you got married anyway and go through the even more painful and hurting process of divorce years later…(You knew it all along; no surprises here. The only surprise is it took so long for your to finally “cut-loss”!)
There you go.
Now see if you can spot similarities between your day to day living and what you do with your investments or trading positions.
Knowing it is one thing. Willingness to change is another.
It’s not easy.
And it’s definitely not anyone and everyone can overcome this sunk cost fallacy mental block.
If you can, there’s your edge over other investors/traders! Congrats!
Singapore Man of Leisure (welcome to my blog; just google it!)