Disposition effect
Also called: selling winners and holding losers
The habit of selling shares that have risen too early and holding shares that have fallen too long.
It comes from loss aversion and from treating the purchase price as a reference point. The price you paid has no bearing on what a share will do next. A better test is whether you would buy the holding today at today's price.
Learn more in these lessons
- Loss aversion, confirmation bias and overconfidenceWhich mental shortcuts cost investors the most, and what can you do about them?
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