Behavioural Finance
Sunk-Cost Fallacy
Definition
What is Sunk-Cost Fallacy?
Continuing an investmentAn asset or commitment of money made with the expectation of future income, growth, or both. because of past money or effort that cannot be recovered.
Example in practice
How This Looks in Practice
An investorA person or organisation that commits capital with the expectation of a financial return. adds more capital solely because they have already lost heavily.
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Related Terms
Behavioural Finance
Loss Aversion
The tendency to feel losses more strongly than equivalent gains.
Behavioural FinanceOverconfidence Bias
The tendency to overestimate one's knowledge, forecasting ability, or control.
Behavioural FinanceConfirmation Bias
The tendency to seek or interpret information that supports an existing belief.
Sustainable InvestingESG Investing
Incorporating environmental, social, and governance factors into investment analysis or ownership.