Sunk Cost

A sunk cost is money or time already spent and impossible to recover. Because it returns under any choice, it should be treated as nonexistent when deciding what to do next.

People do the opposite. They sit through a dull film because the ticket was paid for, and hold a losing stock waiting to get back to even. This is the sunk cost fallacy.

The right question is not how much you have spent but which path is better from here. The money already spent applies equally to both options, so it contributes nothing to the comparison.

In investing the fallacy is expensive. Your purchase price is a number the market does not know, yet it becomes the basis for deciding whether to sell. If the business has deteriorated, selling is correct regardless of what you paid.

The way out is setting criteria in advance. Writing down a condition — sell if earnings fall for two consecutive quarters — forces the decision onto future evidence rather than past spending.