Anchoring
Judging a number by comparing it with another number you saw first, even when that first number is meaningless.
In plain English
A 'was $100, now $50' sign makes $50 feel cheap because of the $100 next to it. Whether $50 is a good price has nothing to do with the crossed-out number. Shops, salespeople and stock charts all rely on it.
Uncle Gary explains
The pub puts a $95 bottle of wine at the top of the menu. Nobody orders it. Everybody feels clever ordering the $35 one, which is exactly what the pub wanted.
Why it matters for your money
Investors anchor on the price they paid or a stock's old high. Neither tells you what the stock is worth now.
Where we tested it
- Is 50% Off Actually Saving You Money?
- Are Black Friday Deals Really Saving You Money? We Each Saved 30%
Related terms
All glossary terms. Educational content, not financial advice.