🩻 The Sunken Cost Fallacy

We all did it at one point or another

To Smart Investors,

Let’s talk about the sunken cost fallacy—that persistent force that lures us into holding onto a stock just because we’ve already invested a chunk of our hard-earned money. I see people wrestle with this every day. They can’t bear to let go of a bad investment because of what it used to cost them.

But here’s the thing: that money is gone. It exists only in the past. The sole question we should ask is: “Does this asset still promise a solid return going forward?” If the answer is “No,” you’ve got no business staying invested.

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I remember a particular stock—an emerging technology play that looked promising on paper. I got in early and watched it rocket for a while. Then, the news took a sharp turn: leadership scandals, supply chain woes, and a questionable pivot in their business strategy. The share price didn’t just dip—it nosedived.

I’d already poured a noticeable portion of my portfolio into it. It would’ve felt painful to sell at a loss. But ignoring the noise and focusing on the fundamentals, I saw that management had lost the plot entirely. So, what’s the rational move?

Sell.

Yes, I could’ve stayed in for the “hope” that it might rebound. But “hope” isn’t a good enough reason when the data screams otherwise. By freeing that capital, I was able to invest in more stable opportunities that helped me recoup losses (and then some).

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“Never let past failures weigh you down when there’s a world of opportunities waiting.”

We’re not exactly short on exciting US stocks—from renewable energy firms to cutting-edge AI platforms—so why keep your money locked up in a losing proposition?

The hardest step is often admitting your initial judgment missed the mark. Trust me, I’ve been there. But once you do, the benefits of re-allocation can be tremendous. Your portfolio is not a museum of your mistakes—it’s a living, evolving entity meant to grow and thrive.

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Sometimes, folks mistake a high purchase price for “value.” I’ve had readers email me saying, “I bought this stock at $300. It’s down to $150, but I just can’t let it go. I spent so much on it.” My response is always the same: “If you didn’t own it today, would you buy it at $150?” If the answer is “No,” then you’re better off redeploying that money into something else.

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A fresh perspective:

• Future potential > Past expenses

• Adapt quickly to new information

• Diversify, don’t cling

This is the mantra I try to impress upon my almost 1,000 paid subscribers, who generously fork over a pretty penny each month to read my analyses (honestly, it still feels surreal). Most of them, in turn, have learned that cutting ties with a sunk cost can be the best financial decision they can make.

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I’m not just tossing around theory. I apply this mindset to practically everything—investments, business decisions, even personal life. Spending a lot of time or money on something doesn’t obligate you to keep going down the same path if it no longer serves your goals. That’s the essence of the sunk cost fallacy.

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Listen, every single one of us has regrets, be it in investing, relationships, or random life choices. But regret, by definition, is rooted in the past. It’s the future that matters, especially when it comes to building wealth in the stock market.

So take a moment to review your portfolio. Ask yourself: “If I had no position here already, would I invest in this stock today?” If the honest answer is “No,” there’s your sign.

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As always, I’ll be here, tapping away at my keyboard, sharing updates on the US market, calling out intriguing sectors, and reminding you why the past should stay where it belongs—behind you.

“The best Investors focus on tomorrow’s upside, not yesterday’s costs.”

Until next time, thanks for reading and sticking with me through this financial journey. If you have questions, please don't hesitate to contact me. I might be busy juggling four kids, but this community is my home turf, and I’m grateful for each one of you.

Stay bold, stay rational, and keep your eyes on the horizon.

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May the LORD Bless You and Your Loved Ones,

Jack Roshi, MIT PhD