Sunk cost fallacy
Letting money, time or effort that's already spent, and can't be recovered, steer a decision about the future.
In plain English
Money already spent is gone whichever option you choose next, so it shouldn't tip the choice. The fair comparison is between the options in front of you, counted from today. A useful test: would you buy it, start it or join it today, at today's price, knowing what you know now?
Uncle Gary explains
Uncle Gary won't sell his camper van until it has 'paid for itself'. At two trips a year it never will, so his rule guarantees he keeps losing money on it, for the sake of money he spent three years ago.
Why it matters for your money
'I'll sell when it gets back to what I paid' is the trading version. The market doesn't know your purchase price; the only question is whether the position is worth holding from today.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.