Anchoring Bias: How Irrelevant Information Can Influence Investment Decisions
Learn how anchoring bias can cause investors to fixate on irrelevant information, and how Optimize helps you make decisions based on your goals and the present—not arbitrary numbers from the past.
As investors, we often look for reference points to guide our decisions. But sometimes, those reference points can be misleading, or even completely irrelevant to the decision at hand. This is where anchoring bias comes into play—a behavioural tendency to rely too heavily on the first piece of information we encounter when making decisions, even if it has little or no relevance to current realities.
In investing, anchoring bias can cause you to hold onto outdated information, such as a past stock price, a previous high-water mark, or a round number, and allow it to influence your current choices. This bias can quietly distort decision-making, preventing you from adapting to new information or accepting when circumstances have changed.
This matters when you are deciding whether to buy, sell, or hold investments, or when you are reflecting on your portfolio’s performance. At Optimize, we help you recognize when anchoring might be influencing your thinking and provide the guidance and structure to bring your focus back to your long-term goals and current financial plan.
How Anchoring Bias Shows Up in Investing
Anchoring bias can lead investors to:
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Refuse to sell a stock that has dropped below their purchase price, waiting for it to “get back to even” before they act.
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Focus on a stock’s previous high, assuming that price is its true value, regardless of current fundamentals.
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Use arbitrary round numbers as psychological targets, such as refusing to sell an investment until it hits $100, even if $99.75 would still meet their goals.
For example, imagine an investor who bought a stock at $50. The stock has since declined to $35 due to changes in the company’s industry and outlook. Despite evidence that the company’s prospects have deteriorated, the investor refuses to sell, anchored to the belief that the stock is only worth selling once it returns to $50. In doing so, they overlook the new information that suggests the stock’s fair value may now be much lower, and they continue to hold the position based on an emotional attachment to a past price.
The Long-Term Risks of Anchoring Bias
Anchoring bias can lead to decision paralysis, missed opportunities, and an inability to make objective, forward-looking choices. It can keep investors stuck in underperforming positions, reluctant to adjust their strategy even when their financial goals or market realities have changed.
Over time, these patterns can result in portfolios that are misaligned with your risk profile, time horizon, or objectives, quietly eroding your progress toward the outcomes that matter most.
How Optimize Helps You Manage Anchoring Bias
At Optimize, we help you avoid the traps of anchoring bias by keeping your investment decisions anchored to your goals, your financial plan, and current market data—not to irrelevant or outdated reference points.
Our disciplined portfolio management process uses evidence-based strategies, ongoing reviews, and data-driven rebalancing to ensure your investments continue to serve your long-term plan. We help you focus on what you can control—like your risk comfort, your savings rate, and your time horizon—while letting go of arbitrary numbers that do not reflect your current situation.
Through personalized coaching, we work alongside you to challenge assumptions, explore your thinking, and help you make decisions that are grounded in your plan, not in emotional anchors from the past.
By staying focused on your goals and the present moment, you can make more rational, confident investment decisions, and avoid the costly detours that anchoring bias can create.