What Is the Sunk Cost Fallacy?

By Robin Hartill, CFP – Updated Apr 23, 2025 at 11:46 AM

Key Points

Sunk cost fallacy involves continuing investments due to past costs, not future benefits.
Recognize irrational holding by setting pre-determined exit points for investments.
Regularly review investment decisions to adapt to better opportunities timely.

Have you ever gotten 100 pages into a book, realized you hated it, but finished it to the end because you'd already invested a few hours of your time? If so, you've succumbed to the sunk cost fallacy. The sunk cost fallacy is an economic phenomenon in which people continue an activity or keep an investment because of the time or money they've already spent -- even though it's clear that walking away is the best decision.

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A trader looking at monitors in dismay with hands on head. — Image source: Getty Images.

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About the Author

Robin Hartill, CFP, is a contributing writer at The Motley Fool. Robin’s work has also been published by Yahoo Finance, USA Today, and Penny Hoarder. She is a graduate of the University of Florida.

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Robin Hartill has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.