How to Fight Stock Anchoring

Hello. My name is stock anchoring dopamine addiction.


Hello. My name is Palmer, and I am a dopamine addict.

I’ve been known to check Morningstar a little too often during the week.  Not just the reports, but stock prices.  And I know I’m not the only one.  Checking stock prices too frequently is a habit that contributes to so many unconscious biases for so many investors.

A Watched Stock Never Rises

A Watched Stock Never Rises


We know in theory that proper, long-term, value investing works on the order of decades. Yet, our brains want to see the wiggles of every day.  Why?  Exactly the same reason that turns people into slot jockeys and pigeons dance around in a cage.  It’s classical conditioning of the best kind; the random reinforcement kind that makes the refresh button so enticing when portfolio view is loaded.

Most of us who have read a bit about investing, especially behavioral investing, know that these random fluctuations in price over the short-term are essentially meaningless.  It’s the voting machine of Mr. Market at play, yet some of us still subconsciously watch them like a hawk, hoping for a quick burst of dopamine.

In addition to wasting our time, time we could spend doing actual, business driven research, checking stock prices every day sets up unconscious stock price anchors regardless of the intrinsic value of the security.  If it falls below our preset anchor, we start thinking it’s cheap even if it’s trading at 40 times their annual earnings with unrealistic growth expectations.

In addition, following stocks on our watchlist that we hope to buy more of suddenly feel outside our price range if they start rising, even if the price is still well below intrinsic value.  Here’s where we get stuck, twiddling our thumbs when a great investment is right before us.

How to Stop Watching Stocks and Start Researching

Breaking highly ingrained habits is hard but doable.  The worst thing to do is say, “I’m going to stop.  I’ll just not do it any more,” then not decide how you’ll actually go about doing so.  We are fighting the same brain chemistry that creates gambling and drug addictions, albeit at a much smaller level.  A good first step is go and delete all those bookmarks you have that take you directly to MarketWatch or a portfolio view.

One of the best ways is to replace an ingrained habit is with a better one.  Instead of checking your stocks, pick a value investing blog like Interactive Investor and spend your time there when you feel the urge coming on.

See how long you can go without checking price data


On a calendar, mark the number of days you check solid business information, like reading SEC reports from SECWatch or hanging around at Footnoted, and not checking price quotes.  See how long you can keep a streak up and try not to break the chain unless it’s a date for reviewing your portfolio you’ve specified beforehand.

In reality, you only really need to check prices very rarely, and at set intervals.  Long-term gains make mincemeat out of the short-term, and though our unconscious brains believe otherwise, checking stock prices every minute to find just the right time to buy and sell doesn’t work.

And, in the interest full disclosure, I’m attempting to break this habit by creating a blog post.  Social proof (read as peer pressure) is still one of the BEST ways to break a habit, and public declarations in the form of a blog or twitter post have a lot more weight than you think.  I know how good I feel when I go through periods of just following the business and not the stock.  It makes me a much better investor.


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  1. A Better Way to Measure Portfolio Performance | Valuable Behavior - July 28, 2011

    […] found myself up till recently checking my portfolio WAY too often, ( as mentioned in my article on why I’m a dopamine addict ) and I needed a way to prevent the movements of the market from affecting my investing process. […]