Why Are Investors Glued to a Stock’s Old Peak?
Jun 18, 2025
Why are investors glued to a stock’s old peak? Because they’re trapped in the psychological quicksand of anchoring bias—fixating on arbitrary reference prices that have zero bearing on future value.
When Peloton trades at $24 after hitting $171 in 2021, millions of investors can’t stop seeing that ghost of $171. Don’t let yesterday’s price tag scare you from today’s opportunity—or seduce you into tomorrow’s disaster. That old peak is as relevant to future returns as your ex’s phone number.
Anchoring bias, defined as the tendency to rely too heavily on the first piece of information encountered when making decisions, creates systematic mispricing across markets. What is anchoring bias and how does it impact investing? It’s the invisible force that makes investors pay $100 for a stock worth $50, simply because it once traded at $200.
IPO valuations provide the perfect laboratory for anchoring insanity. When Rivian IPO’d at $78 and spiked to $179, that peak became the anchor. Investors spent the next year waiting for a “recovery” to an unsustainable price that reflected zero fundamental reality—just four days of market euphoria.
The Tesla Trap: When Anchors Become Religion
Tesla hits $414 in November 2021. Eighteen months later, it trades at $110. Yet Tesla bulls remain anchored to that $414 peak, treating any price below it as a “discount” rather than asking whether $414 ever made sense.
The psychology is devastating: investors who bought at $350 won’t sell at $250 because they’re anchored to their entry price. They won’t buy at $110 because they’re anchored to the $414 peak. Paralyzed by arbitrary numbers, they miss both risk management and opportunity.
This isn’t investing—it’s numerology. The market doesn’t care about your anchor points. It cares about future cash flows, competitive dynamics, and fundamental value. Every decision based on historical prices rather than forward-looking analysis is a decision corrupted by anchoring bias.
Crypto’s Anchor Apocalypse
Bitcoin reaches $69,000. Ethereum hits $4,800. Dogecoin—a literal joke—touches $0.73. These peaks become permanent psychological anchors, distorting every future investment decision.
When Bitcoin crashes to $15,000, anchored investors see a “78% discount” rather than asking whether $69,000 was ever rational. They’re not analyzing blockchain adoption or monetary policy—they’re comparing current prices to arbitrary historical peaks. The anchor becomes the analysis.
Retail investors pour billions into crypto at $30,000, convinced they’re buying “cheap” relative to $69,000. But cheap relative to what? An unsustainable peak driven by stimulus checks and Elon tweets? Anchoring bias transforms speculation into science fiction.
The IPO Industrial Complex
Nothing exposes anchoring bias like IPO pricing. Robinhood IPOs at $38, immediately spikes to $85, then collapses to $6. Which price was “right”? Anchored investors spent years debating this meaningless question.
The $85 peak—lasting literally hours—became Robinhood’s psychological anchor. Investors at $70, $50, $30 all believed they were buying a “bargain” relative to that ephemeral peak. They weren’t evaluating Robinhood’s business model or regulatory risks—just comparing numbers to a random high-water mark.
Investment banks exploit this brilliantly. Price an IPO low enough to create a first-day pop, establishing a high anchor. Retail investors spend years chasing that anchor while insiders dump shares. It’s psychological manipulation disguised as price discovery.
The 52-Week High Cult
Financial media obsesses over 52-week highs and lows, creating artificial anchors that dominate investor psychology. “Amazon down 50% from its high!” screams the headline, as if last year’s peak represents some natural price level.
These arbitrary timeframes create arbitrary anchors. Why 52 weeks? Why not 47 weeks or 511 days? The market doesn’t operate on annual calendars, but investors anchor to these meaningless metrics because they’re prominently displayed.
Professional traders exploit this. They know retail investors are anchored to 52-week highs, creating predictable behavior around these levels. When amateurs see “50% off the high,” professionals see “still 30% overvalued”—because they’re not anchored to arbitrary peaks.
Loss Aversion Meets Anchoring: A Toxic Marriage
Anchoring bias becomes lethal when combined with loss aversion. Investors anchor to their purchase price, then loss aversion makes selling below that anchor psychologically excruciating. This creates the “break-even disease”—holding losers forever, waiting to “get back to even.”
Meta investor buys at $350, watches it fall to $90. Instead of evaluating Meta’s current prospects, they’re anchored to $350. Every decision becomes about recovering to that arbitrary anchor rather than maximizing forward returns. They’ll hold through $100, $150, $200—not because of analysis, but because of anchoring.
Meanwhile, investors who bought at $90 without anchor bias might sell at $180, doubling their money while the anchored investor waits for $350. Same stock, same timeframe, vastly different outcomes—all because of psychological reference points.
The Valuation Anchor Illusion
Even sophisticated investors fall for valuation anchoring. “It traded at 50x earnings in 2021, now it’s only 20x—what a bargain!” But what if 50x was insane and 20x is still overpriced?
Zoom trades at 300x earnings during pandemic peak. When it falls to 40x earnings, anchored investors declare it “cheap.” But 40x earnings for a video conferencing company facing brutal competition isn’t cheap—it’s just less insane than 300x.
This relative anchoring destroys capital. Investors compare current valuations to recent extremes rather than historical norms or fundamental justified levels. They’re not buying value—they’re buying relative to an anchor.
The AI Anchoring Experiment
Current AI hype creates fresh anchoring disasters in real-time. NVIDIA hits $1,200, becomes world’s most valuable company. That peak instantly becomes the anchor for millions of AI investors.
When NVIDIA corrects to $800, anchored investors see a “bargain” rather than questioning whether any semiconductor company deserves a trillion-dollar valuation. They’re not analyzing AI adoption curves or competitive threats—just comparing to a recent, potentially absurd peak.
Every AI stock gets anchored to its 2024 peak. C3.ai, Palantir, even random companies that mentioned “AI” once—all judged relative to unsustainable highs rather than business fundamentals. The anchor becomes more real than reality.
Breaking Free: The De-Anchoring Protocol
You can’t eliminate anchoring bias, but you can systematically counteract it. First, recognize that every visible price becomes a psychological anchor. Those 52-week highs, your purchase price, recent peaks—all create decision distortion.
Professional approach: evaluate every investment as if you’re seeing it for the first time. Cover the historical chart. Ignore your entry price. Ask: “At today’s price, with today’s information, is this the best use of capital?”
Create “anchor alerts”—when you catch yourself referencing historical prices, stop. Historical prices predict future prices about as well as last year’s weather predicts tomorrow’s. The market is forward-looking; your anchors are backward-looking.
The Institutional Edge
Institutional investors have one advantage: they’re measured on forward returns, not recovery to arbitrary anchors. A pension fund doesn’t care if Tesla returns to $414—they care if it outperforms from current levels.
This creates opportunity. While retail investors wait for anchored prices, institutions evaluate forward prospects. They’ll buy “expensive” stocks with momentum and sell “cheap” stocks anchored to obsolete peaks. They’re playing a different game.
Copy their approach: implement systematic rebalancing that ignores anchors. Set position sizes based on conviction and risk, not distance from historical prices. Let math override psychology.
The Sharp Truth: Anchors Are Quicksand
What is anchoring bias and how does it impact investing? It’s the cognitive quicksand that makes investors value stocks based on irrelevant historical prices rather than future fundamental prospects. It transforms investing from analysis into archaeology.
Every minute spent comparing current prices to historical anchors is a minute not spent analyzing future value. The market doesn’t care what you paid. It doesn’t care about last year’s peak. It only cares about tomorrow’s cash flows.
Stop investing in the rearview mirror. Stop waiting for arbitrary prices. Stop letting random historical peaks dictate your financial future. The most expensive anchor isn’t the one dragging down your portfolio—it’s the one dragging down your thinking.
Cut the anchor. Calculate forward returns. Let others wait for yesterday’s prices while you capture tomorrow’s gains.
