Many individuals will refuse to sell a stock or a mutual fund at a loss even though it may be clear that the investment will not turn around. This is an example of a:
A) sunk-cost trap.
B) anchoring trap.
C) status-quo trap.
D) confirming-evidence trap.

Question

Quizplus · Accepted Answer

This behavior is an example of a sunk-cost trap, where individuals continue a behavior or endeavor as a result of previously invested resources (time, money, or effort), even if it's clear that the investment will not yield a favorable outcome. In this case, the prior investment in the stock or mutual fund, and the loss associated with it, influences the decision to hold onto it, hoping for a turnaround, rather than cutting losses.

Many Individuals Will Refuse to Sell a Stock or a Mutual