InvestorQ : What explains why people tend to fall in love with a stock?
Abhisha Yadav made post

What explains why people tend to fall in love with a stock?

Abhisha Yadav answered.
3 years ago

The first excuse is that they have bought it for the long term. So what? Nobody knows the long term. More often than not, it is the unwillingness to admit that the decision was wrong. There is also a fallacy that holding on to a stock for an infinitely long period assures returns. Perish that thought!

Secondly, many argue that the stock has served them well over the years and that builds an emotional attachment with the stock. Investing is not like a buying a car or a washing machine. The most reliable and pedigreed names need not be the most profitable. There is an obvious tendency to oversimplify and believe that the past is a credible indicator of the future.

A common argument and an innocent one is that nothing seems to be wrong with the stock. This is such a common excuse for holding on to a stock. Get real. You are in the equity market to make money out of the next big idea. You are not a bond-holder looking to scrap a small premium over the index. Remember that when you fall in love with a stock or an idea, you uncork emotions and bottle up your common sense.