The First Anchor Is Making Decisions For Us
Why the first number you see controls every decision after
My friend sold at 20 percent profit. The stock kept climbing. Three years later I asked him why he never bought back.
He said: “Too expensive now.”
Compared to what? He sold. His cost basis is gone. The question is whether the stock is worth buying today at $40. Not whether $40 feels high compared to the $8 he paid.
He cannot shake that first number. Every price since then gets judged against $8. $10 felt expensive. $20 felt overvalued. $40 felt insane. None of those feelings were about value. All of them were about distance from $8.
I see this in many areas.
One example is in Singapore’s HDB (Housing Development Board) market.
A seller lists at $850,000 because a comparable unit in the block sold for that last year. Market softens. Offers come in at $800,000. The seller refuses.
The anchor is $850,000. Accepting $800,000 feels like losing $50,000. Market conditions changed. The anchor did not.
Months pass. The market softens further. The seller still will not move.
This pattern is called anchoring bias. Our brains grab the first number we see and every judgment after that is relative to that anchor.
When Sellers Won’t Move
Resale prices hit record highs in Q3 2025. October transactions fell to the lowest since the 2020 pandemic.
People say the market is frozen. It is not. HDB prices are up 54 percent since Q1 2020. The problem is not liquidity. The problem is anchors.
Sellers anchor to last year’s peak transaction in their block. Neither that anchor nor current market conditions matter to them. They treat their anchor as truth. So nobody moves.
This is not unique to property. Behavioral finance researchers Hersh Shefrin and Meir Statman studied investor portfolios and documented the same pattern. They called it the disposition effect.
Anchoring does not stop at entry prices. It mutates. The tendency to sell winning investments too quickly while holding losing investments too long.
Investors sell winners too early and hold losers too long.
Why? The anchor is your purchase price. Anything above it feels like a win. You sell to lock it in. Anything below it feels like a loss. You hold to avoid realizing it. Even when holding makes no sense.
This happens constantly. Someone buys at $20. Stock hits $35. They feel rich but do not sell. Stock drops to $25. Now they refuse to sell because $35 is the anchor. It feels like a loss even though the position is still up 25 percent from entry.
The peak price replaced the purchase price as the anchor. The decision is no longer about whether $25 is a good price. The decision is about $35.
Finance professor Terrance Odean analyzed thousands of brokerage accounts and found investors were about 50 percent more likely to sell a winner than a loser. Not because the winners had worse prospects. Because winners feel good to sell and losers feel painful.
The anchor made the decision. Not the analysis.
Your Brain Adjusts, But Not Enough
Our brains adjust from the first number we see. But the adjustments are never enough.
Nobel Prize-winning economist Richard Thaler and his colleague Eric Johnson studied how people make financial decisions. They found we do not ask “is this worth the price?” We ask “is this price acceptable compared to my reference point?”
We do not evaluate whether a stock at $40 fits our portfolio. We evaluate whether $40 feels too high compared to what we remember. Markets do not care about our reference point. Value changes. Circumstances change. Our anchor stays fixed.
The mechanism is identical whether the stakes are property, stocks, or spending decisions. First number in, everything else gets judged relative to that.
Where This Shows Up
I watched someone hold a stock position through a 40 percent drawdown because it once hit peak price. When I asked whether they would buy it today at current price, they said no. But they would not sell either.
Peak price was the anchor. Selling below it felt like admitting a mistake. Opportunity cost accumulated quietly while they waited for it to return to a number that no longer mattered.
Would You Buy It Today?
Would you buy this today at current price?
Not compared to what you paid. Not compared to peak price. Not compared to what your neighbor sold for. Would you buy this today with what you know now at the price it trades at right now?
What I observe is that when the answer is no, holding usually reflects anchoring, not conviction. When the answer is yes and you already sold, the anchor kept you out.
The past price is information about what you did then. It is not information about what you should do now.
My friend kept comparing $40 to $8. The comparison was automatic. His brain did it without asking permission. He watched the stock triple after that.
He is not stupid. He is human. Anchoring works on everyone. Psychologists Daniel Kahneman and Amos Tversky studied how people make decisions under uncertainty. Kahneman won the Nobel Prize for this work. They proved anchoring works even when people know the anchor is random. The first number pulls judgment toward itself.
If random numbers can anchor judgment, imagine what purchase prices do.
Notice It
We cannot eliminate anchoring. But we can notice it.
When we feel resistance to a price, ask what number am I comparing this to. Our cost basis is not relevant to whether we should hold today. Our neighbor’s sale price is not relevant to whether we should buy today. Peak price from last year is not relevant to whether we should sell today.
Name the anchor. Check whether it matters. Usually it does not.
Then ask the reset question. If we did not own this, would we buy it today at current price? If we would not buy it, we should not hold it. The anchor is telling us to hold. The analysis is telling us to sell. Follow the analysis.
Look at your portfolio. For losers, ask would I buy this today? For winners you sold, ask where are they now? If you sold winners too early and held losers too long, anchoring is running your portfolio.
When the HDB market slows, people say it is frozen. It is not. When we refuse to sell below our entry price, the market is not frozen. We are.
The stock does not know what we paid. The flat does not know what the seller bought it for. The market does not care about our anchor. Only we do.
The first step is recognizing which number in our head is doing the anchoring. The second step is deciding whether that number should matter at all.
Most of the time, it should not.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Please consult a qualified professional before making investment decisions.