Priya bought a stock at ₹185. It has slipped to ₹115. She opens her portfolio every evening, checks the price, and waits. She is determined not to sell because ₹185 is lodged in her head like a price it "should" return to. The business outlook is not what is keeping her in. That number is. The market moved on. Priya hasn't.
What is the anchoring bias in investing?
In simple terms, anchoring bias is the tendency to rely too heavily on the first piece of information you encounter when making a financial decision. That number, that price, that figure becomes a reference point your mind keeps returning to, even when newer and more relevant information is available. Everything that follows gets measured against that first impression, whether it deserves to be or not.
Think of it like a ship's anchor. The ship can drift, but only as far as the chain allows. The anchor was dropped at a random spot, yet it controls how far the ship can move.
Where you would have already felt Anchoring Bias:
The stock that should go back up
Just like Priya, many investors use their buy price as the benchmark for every decision that follows. The stock drops and instead of asking what the business is worth today, the only question on their mind is when the price will return to what they originally paid. Future earnings, sector outlook or management changes do not get the attention they deserve. The original buy price has already decided what a good outcome looks like.
Selling at a loss is a feeling most people will go to great lengths to avoid. So they hold. Anchoring bias sets the number. Loss aversion keeps the investor glued to it. Together, these two forces form one of the most expensive combinations in personal finance.
The builder’s opening quote
Imagine walking into a property negotiation where the builder opens with ₹1.2 crore. After two site visits and some back and forth, the price is brought down to ₹95 lakh. The buyer walks away feeling like they won. But the question worth sitting with is whether ₹95 lakh was actually a fair price, or whether ₹1.2 crore simply made it feel like one. The builder set the anchor before the conversation even began. Everything after that was just movement within the chain.
The opening quote was never meant to be accepted. It was meant to be the anchor. Understanding how anchoring bias affects a property buying decision can help the buyer save lakhs, simply by questioning whether the first number was ever realistic.
The mutual fund NAV trap
The mutual fund NAV anchoring trap is one of the most common mistakes new investors make in India. A new investor has two mutual fund options, one with a NAV of ₹12 and the other with a NAV of ₹280. The ₹12 fund feels cheaper, more accessible, like there is more room to grow. The ₹280 fund feels expensive, as if the good times have already passed. Neither feeling is correct. NAV is simply the current price per unit of a fund. It says nothing about value, future returns or how much the fund can grow from here.
The number on the screen became the anchor. A decision that should be based on fund performance, expense ratio and investment objective ends up being driven by a figure that carries no real meaning in that context.
The salary negotiation
Most people wait for the employer to speak first in a salary discussion. The opening figure then becomes the reference point for the entire conversation, regardless of what the market rate actually is. Being aware of market rates and confidence in one's own performance can shift the anchor in the employee's favour, making the conversation more collaborative and better informed.
The discount delusion
The tag reads ₹4,000 with a 60% discount. Before even thinking about it, the brain has registered a saving of ₹2,400 and the product already feels like a good deal. But the more honest question is whether the same product would have made it to the cart if ₹1,600 were the only price on the tag, with nothing crossed out beside it.
In most cases the answer is no. The ₹4,000 was never really a price. It was an anchor. Once it was set, ₹1,600 stopped being evaluated on its own merit and started being evaluated as a bargain. That is exactly what it was designed to do. Most shoppers skip comparing alternatives or checking whether the product is available elsewhere for less, because the anchor has already made the decision feel like a good one.
Also read: Think Like a Turtle | Why You Don’t Need to Predict Markets
How to recognise anchoring bias in your financial decisions
The honest answer to these questions will tell you whether an anchor is at work.
Would I buy this stock today, at today's price, if I had never owned it before?
Is this a good deal because of what the product is worth, or because of the price I saw first?
Am I holding on because the business deserves it, or because a number in my head says I should?
The difference between anchoring bias and genuine patience in investing comes down to one question: is the wait based on what the business is worth today, or on the price paid in the past? Patience is informed by future value. Anchoring is driven by a historical number. Making better financial decisions without anchoring bias requires a deliberate shift: from asking 'will it recover to my buy price?' to asking 'what is this worth right now, and is it worth holding?’.
The market does not know what you paid
Priya will check her portfolio again this evening. The market value of her stock sits at ₹115, indifferent to the price she paid. The number she is waiting for exists only in her memory of the day she bought it. The business has moved on. The market has moved on. The only thing still anchored to ₹185 is her decision.
Anchoring bias in the stock market does not announce itself. It does not feel like a mistake in the moment. It feels like patience, like discipline, like waiting for the right price. Recognising it ensures that an old, random number isn’t influencing your financial decisions.
Disclaimer: The information provided in our blogs is for informational purposes only and should not be construed as financial, investment, or trading advice. Trading and investing in the securities market carries risk. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Copyrighted and original content for your trading and investing needs.
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