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The irrational tendency to continue investing in a losing position because of the resources already committed, rather than evaluating the decision based on future prospects.
In investing, the sunk cost fallacy manifests when an investor holds onto a losing stock thinking, "I have already lost $5,000, I cannot sell now." The rational approach is to evaluate whether the stock is a good investment at its current price, regardless of what you paid. The money already lost is gone whether you hold or sell. This fallacy also affects corporate decision-making: companies pour more money into failing projects because they have already invested heavily. The antidote is to ask yourself, "If I did not already own this, would I buy it today at this price?" If the answer is no, it may be time to sell.