Endowment effect
The endowment effect is the tendency to place a higher value on something simply because you already own it. In investing, this shows up when an investor holds onto a they own well past the point they would actually choose to buy it fresh today, purely because it is already sitting in their .
A useful test for the endowment effect is to ask whether you would buy the exact same today, at its current price, if you did not already own it. If the honest answer is no, but you are still holding it anyway, ownership itself, rather than a genuine belief in the company's prospects, may be what is keeping the position in the .
The endowment effect often works alongside and the , all of which push investors toward holding what they already have rather than making a fresh, unbiased decision about where their money should be. Periodically reassessing every holding as if deciding whether to buy it fresh today is one of the more direct ways to counter it.