Holding a stock for a long time isn’t automatically a mistake. Long-term investing often requires tolerating volatility and uncertainty. The problem occurs when someone continues holding because they can’t bring themselves to sell, rather than because the investment still makes sense. Here are the main reasons that happens.

They Don’t Want to Admit They Were Wrong

This is probably one of the biggest reasons. An investor buys a stock because they believe their analysis is correct. When the stock falls, selling can feel like admitting that the original decision was a mistake. The longer someone has researched the company and the more convinced they were, the harder it can be to change their mind. Instead of objectively reassessing the investment, they may start defending the original thesis.

They Are Waiting to Get Back to Breakeven

People often tell themselves, “I’ll sell when it gets back to what I paid.” This sounds logical, but the stock market doesn’t care about your purchase price. If you bought at $100 and the stock is now $50, the important question is whether you would buy the stock at $50 today. Waiting for $100 simply because that’s where you started can keep you invested in something you wouldn’t otherwise choose to own.

Loss Aversion

A realized loss can feel much worse than an unrealized loss. When the stock is down 40% on your screen, you can still imagine a recovery. Once you sell, the loss feels final. This makes investors reluctant to turn an unrealized loss into a realized one, even when selling may be the more sensible decision.

Hope

Hope can keep investors attached to a deteriorating position. They might think, “Maybe next quarter will be better,” “Maybe interest rates will fall,” “Maybe the new CEO will fix things,” or “Maybe the market will realize how valuable this company is.” There is nothing wrong with believing a company can recover, but hope becomes dangerous when it replaces a specific, evidence-based investment thesis.

The Sunk-Cost Fallacy

The investor thinks, “I’ve already put $20,000 into this, so I can’t sell now.” But the $20,000 is already in the past. If the position is currently worth $12,000, the relevant decision is what to do with that $12,000 today. The money you’ve already lost shouldn’t force you to risk the money you have left.

Anchoring to the Previous High

Investors often anchor to a previous price. A stock falls from $100 to $60, and they think, “It used to be $100, so $60 must be cheap.” But the previous price isn’t necessarily an indication of current value. The company’s earnings, competitive position, balance sheet and future prospects may have changed considerably.

They Think “It Can’t Go Much Lower”

A stock falling 50% can create the illusion that most of the downside has already happened. Investors may think, “Surely it can’t fall another 50%.” But there is no mathematical floor created by the previous price. A stock falling from $100 to $50 can fall from $50 to $25 just as easily if the underlying business continues deteriorating.

Averaging Down Becomes an Emotional Commitment

Buying more after a decline can be rational when the investment thesis remains strong and the valuation has become more attractive. But sometimes investors keep buying simply because the stock keeps falling. They gradually become more financially and emotionally committed to the position. Eventually they think, “I’ve put so much into this that I can’t sell now.” What began as averaging down can turn into doubling down on a thesis that hasn’t been properly reassessed.

Confirmation Bias

Once investors own a stock, they often start looking for information that confirms their decision. If the company announces something positive, they pay attention. If it receives negative news, they may immediately explain why it doesn’t matter. Over time, the investor can end up constructing a case for holding rather than objectively evaluating whether holding remains sensible.

They Don’t Want to Regret Selling

There’s a particularly painful scenario: you sell at $50 and the stock subsequently rises to $80. You may think, “I knew I shouldn’t have sold.” To avoid that potential regret, you keep holding. But avoiding the possibility of regret isn’t a reliable investment strategy. Every decision involves uncertainty, and the future price isn’t known when you make the decision.

They Are Afraid of Missing the Recovery

A stock may have fallen substantially, and the investor worries that selling now means missing the eventual rebound. This creates a fear of being out of the position when the turnaround finally happens. The investor therefore stays invested despite having less and less confidence in the original thesis.

They Focus on the Stock Instead of the Capital

A useful mental shift is to stop thinking, “Should I hold this stock?” and instead think, “What should I do with this capital?” If you have $15,000 invested in a stock today, you don’t really have a choice between keeping your original investment and selling. You have approximately $15,000 of current capital that can either remain in that stock or be allocated somewhere else. Thinking about the capital rather than the ticker can make the decision much clearer.

Lauren Hua is a private client adviser at Fairmont Equities.

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