Title: How Anchoring Bias Can Trap Your Finances: Lessons from a Chicago Client (and Peloton Stock)

Have you ever found yourself clinging to a financial decision, hoping it’ll magically turn around? Maybe you bought a house at the peak of the market, or invested in a hot stock that’s now a cold case. If so, you’re not alone. I’ve seen this play out countless times as a financial planner in Chicago.

Let me tell you about a client I worked with back in 2016. (For privacy, let’s call him Mark.) Mark’s story is a classic example of how our brains can trick us into holding onto losing bets-thanks to a little mental trap called anchoring bias.

Mark’s Real Estate Dilemma

Mark had bought a condo in Chicago’s West Loop during the 2007 boom. Fast forward to 2016, and the neighborhood was thriving, but his specific building had issues-think special assessments, noisy neighbors, and a sluggish HOA. The value of his unit had dropped by nearly $100,000 from what he paid. Ouch.

To make matters more complicated, Mark had just landed his dream job in the suburbs. He was ready to move, but the thought of selling at a loss made him queasy. “Maybe I should just rent it out until the market recovers,” he said. Sound familiar?

The Anchoring Trap

Here’s where anchoring bias sneaks in: Mark was fixated on the price he paid for the condo. That number-his “anchor”-was coloring every decision he made, even though the market had changed and his life had moved on.

This is a common cognitive bias. We humans love to latch onto reference points, even when they’re no longer relevant. In Mark’s case, the anchor was his original purchase price. In your case, it might be the highest value your 401(k) ever hit, or the price you paid for that shiny tech stock.

A Quick Detour: Peloton’s Wild Ride

Let’s look at stocks for a second. Remember Peloton? Imagine you bought shares six months after their IPO, when the world was still working out at home and Peloton seemed unstoppable. You paid around $30 per share. For a while, you felt like a genius as the price soared past $160 in 2021.

But as of today? Peloton is trading around $4 a share. That’s a 90%+ drop from its peak. If you’re anchored to your original purchase price, you might keep holding, hoping it’ll bounce back. But is that rational-or just wishful thinking?

Back to Mark. After a few honest conversations (and a little tough love), he realized he didn’t have to make his money back the same way he lost it. He could sell the condo, take the loss, and focus his energy on building wealth with his new job and opportunity.  

The result? Mark sold the condo, freed up his mental bandwidth, and within two years, he’d more than made up the loss through his new job opportunity. He stopped letting a single bad investment dictate his future.

What’s the Lesson Here?

Anchoring bias is sneaky. It keeps us stuck-whether it’s a house, a stock, or anything else we’ve invested in. But you don’t have to let a past decision define your financial future. Sometimes, the best move is to cut your losses, clear your mind, and redirect your energy toward new opportunities.

So, next time you catch yourself saying, “But I paid X for this!”-pause. Ask yourself: Is this anchor helping me, or holding me back? If it’s the latter, it might be time to let go.

Ready to break free from financial anchors?
Let’s chat about your goals and how to create a plan that works for your life-not your past decisions. Reach out today for a conversation that could change your financial story.

Looking for help making big, complex or difficult decisions?  Reach out and get a meeting on the books with our team.  

https://www.sterlingedgefinancial.com/ 

Book a Meeting with Kit Lancaster CFP 

Book a Meeting with Katie Sauer

This content is being provided for informational purposes only and should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Diversification and asset allocation strategies do not assure profit or protect against loss. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Sterling Edge Financial LLC. are not affiliated.

Copyright 2025 Sterling Edge Financial

June 2025