Missed buying a stock over a 10 paisa difference. How to overcome anchoring bias?

Getting married to a highly specific entry price is a classic behavioral pitfall known as anchoring bias. When you anchor yourself to a specific number, you risk missing out on massive long-term gains over a negligible short-term difference. I have seen painful examples of investors tracking a fundamentally strong stock trading around the Rs XX mark.

Convinced of its attractive valuation, they place a buy order but try to be overly precise. They might set a limit order just 5 to 10 paisa below the current trading price, like Rs 50.10 when it is trading slightly higher. The stock price might fall to within few paisa of the bid, but the order never triggers.

The next day, the stock is up 1% and anchoring bias kicks in, making the investor think they should wait for their original price. Often, that price never comes again and the stock eventually rallies to nearly Rs 300.

If you have done your homework and the valuations are attractive, a few paisa or rupees on the entry price do not matter. This is especially true if your holding period is long-term. Do not let a minor price discrepancy prevent you from taking a position in a high-conviction asset.

Accept that you will rarely catch the exact bottom or the perfect entry point. If the fundamental thesis holds true, buy the asset and focus on the long-term compounding rather than the micro-fluctuations of the entry price.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.