Get-Evenitis

The investor who bought a stock at $100, watched it fall to $60, and now refuses to sell until it “gets back to $100” suffers from get-evenitis. This is a compulsive, emotionally-driven hold strategy driven by loss aversion and reference point dependence. The investor will sacrifice forward-looking value to psychologically restore the reference point of purchase price.

The emotional mechanism

An investor who suffers a loss faces an immediate choice: accept the loss and move on, or hold and hope for recovery. Rational finance theory says the choice should depend on forward-looking expectations: Is the asset now a better buy than alternatives? If yes, hold; if no, sell and redeploy.

But loss aversion violates this logic. The pain of realising a loss is acute and immediate, while the hope of recovery is diffuse and future-oriented. The brain weights the certain pain higher. Rather than accept the loss, the investor constructs a mental narrative: “I’ll hold until it gets back to where I bought it, then I’ll sell.” The stock price at which the loss disappears—cost basis—becomes a magical threshold.

This psychological threshold is reinforced by reference point dependence. The purchase price is the investor’s mental anchor. At $100, the position is “even” and the investor is psychologically at rest. At $60, the position is a failure. The asymmetry between these two mental states creates a powerful drive to restore the reference point.

Notably, the investor does not expect the stock to outperform from current levels. Many get-evenitis sufferers would readily admit that the stock is likely to remain flat or worsen. Yet they hold anyway, because the regret of selling at a loss—of crystallising the failure—feels worse than the probable disappointment of continued weakness.

Empirical patterns

Get-evenitis produces recognisable empirical signatures in the data:

Higher-than-average volume at cost basis: When a stock that has fallen sharply rises back toward its former price, trading volume spikes. Holders of underwater positions sell aggressively to “get even,” producing a ceiling effect. This is the opposite of price discovery; it is price distortion driven by loss aversion.

Prolonged underperformance of fallen stocks: Stocks that have experienced large drawdowns underperform the market for extended periods afterward, partly because underwater holders refuse to rebalance and sell. Their get-evenitis keeps capital locked in deteriorating positions.

Poor outcomes for the afflicted investor: A study by Shefrin and Statman found that investors who hold losers hoping to break even realise average losses significantly worse than investors who sell and redeploy. The holding strategy does not pay off; the stock usually falls further, the loss eventually becomes permanent, and the capital has been trapped the whole time.

The illusion of control

Get-evenitis is sustained by a particular cognitive illusion: the belief that the investor can force the stock back to cost basis through willpower and patient holding. The investor thinks: “The market is irrationally low; it will revert. I just need to be patient.” This is often false. The market may have correctly repriced the asset downward due to fundamental deterioration, changing competitive dynamics, or fraud.

By anchoring to cost basis and refusing to sell, the investor actually surrenders control. They have surrendered the decision to the market: When and if the stock recovers, I will sell. But if the stock never recovers—if the deterioration was real—the investor remains trapped indefinitely.

Paradoxically, selling at a loss and redeploying capital into a more promising asset is the exercise of control. The investor is saying: “I was wrong about this investment; here is a better opportunity.” Get-evenitis investors do the opposite; they cede control to the hope that the market will eventually correct their error.

Compounding effects

Get-evenitis is particularly dangerous in compounding environments:

Opportunity cost multiplies over time. If an investor holds a deteriorating stock for five years, hoping to break even, and instead of selling, they could have owned an index fund returning 8 per cent annually, the opportunity cost is not just 40 per cent (8 × 5); it compounds. The real cost of the holding decision often exceeds the original loss.

Bankruptcy risk increases. A company in long-term decline (which is why the stock is down in the first place) faces growing bankruptcy risk the longer the holding period. The investor who bought at $100 and is now at $60 is hoping for recovery. But as years pass and the company deteriorates further, recovery becomes less likely. Get-evenitis often culminates in total loss, not break-even.

Concentration risk deepens. An investor with get-evenitis on multiple positions accumulates an overweight in deteriorating holdings, creating a concentrated portfolio of losers. This violates diversification principles and amplifies downside risk.

Distinguishing from value investing

Value investors sometimes hold depressed positions for years, betting on mean reversion or hidden value. Is this get-evenitis or prudent discipline?

The distinction lies in reasoning. A value investor holds because they believe the asset is undervalued relative to fundamentals, offering superior forward returns. They would hold even if they had bought at today’s prices. A get-evenitis investor holds because of the sunk cost (purchase price), not forward opportunity. If offered a forced exchange—sell the current position and get an identical dollar amount of a different asset—the value investor might do so; the get-evenitis investor would resist, because the pain of realising a loss, not economic logic, is driving the hold.

Operationally, a value investor sets a target price and sells when reached, regardless of whether it is above or below cost basis. A get-evenitis investor’s sole sell target is cost basis itself. This psychological rigidity is the diagnostic.

Avoiding get-evenitis

Several practices inoculate against the condition:

Establish forward-looking decision rules before buying. Before purchasing a stock, write down the reasons for the purchase and the conditions that would cause you to sell. This might be: “I will sell if earnings fall below X, or if the competitive position deteriorates, or if a better opportunity emerges.” When the stock falls, consult the pre-written rule, not the current price.

Never compare to cost basis. Mentally delete the purchase price from your mind. Imagine you received the stock as a gift at today’s market price. Would you buy it now? If no, sell. If yes, hold. This reference-point reframing eliminates the get-even anchor.

Use stop-loss orders or systematic review cycles. A stop-loss automatically sells at a predetermined loss level, preventing indefinite holding. For longer-term holdings, force a quarterly or annual revaluation: “Should I own this asset at today’s price?” If the answer is no, sell regardless of the cost basis.

Realise that losses are information, not failures. A loss tells you something important: your original analysis was flawed, or the world changed, or you had bad luck. The loss is already real, whether you crystallise it on a statement or not. Holding in get-evenitis does not undo the loss; it perpetuates it.

See also