Anchoring is a heuristic revealed by behavioral finance that describes the subconscious use of irrelevant information, such as the purchase price of a security, as a fixed reference point (or anchor) for making subsequent decisions about that security.How can investors use anchoring?Investors can use anchoring to make more informed and rational investment decisions. By understanding how anchoring effects their decision-making, they can avoid being swayed by irrelevant information and make better decisions about when to buy or sell a security.What are some behavioral finance techniques that can help investors overcome anchoring bias?Some behavioral finance techniques that can help investors overcome anchoring bias include: using mental accounting, keeping a trade journal, and considering opportunity cost.
