Sunk Cost Fallacy

This is another form of Loss Aversion by which people tend to take future decissions depending on the money already spent .

In a research for Ohio University theater's 1982-83 season one group of buyers paid normal ticket price $15; another group received $2 discount per ticket and another group received $7 discount per ticket. Logically there should not be any difference in attendance but the result shows that the attandance is directly proportional to the money spent.

This is another psychological trap in which we can easily fall in stock market. Many times we will hold or average stocks which we think fundamentally strungling just because we have bought them at high price even the stock continues to fall. At any time if we think the stock is not worth a buy at current price then it is better to book loss and move on to better counter.

While taking any investment decisions we should concentrate on the bussiness independent to the price performance of the stock.If the underlying bussiness is going to do well then the stock is most probably do well in the future irrespective of it's prformance in the past .

"Why Smart People Make Big Money Mistakes" - Gary Belskey & Thomas Gilovich