Have you ever tried to sell something online—an old phone or a piece of furniture?
You list it for ₹15,000, convinced it’s fair because it served you well. Then the offers arrive: ₹5,000, ₹6,000. You feel insulted. Surely, they don’t understand its value.
But they aren’t cheating you. You are lying to yourself.
This is the Endowment Effect, a psychological bias where we overvalue things simply because we own them.
The emotional price tag
Economics says price is determined by supply and demand. In your head, price is determined by supply, demand—and feelings.
When you buy something, you pay the market price. When you sell it, you demand an emotional price. The gap between the two is where you lose money.
The empty flat ego
This effect is clearly visible in the empty flat ego scenario, a classic situation in Indian metro cities.
Consider Mr. Verma owns a 2BHK where the previous tenant paid ₹40,000. When the tenant leaves, he lists it for ₹42,000, expecting appreciation.
But new societies with swimming pools and gyms have come up next door. His building has none.
Tenants offer ₹35,000. Mr. Verma refuses. Accepting less than the previous rent feels like defeat.
Consequently, he keeps the flat empty for 4 months waiting for the right price, losing ₹1.40 lakh in vacancy—a real financial loss incurred just to protect his .
The ego hold
The same trap plays out in the stock market.
You buy shares of Company X at ₹500 on a friend’s tip. The stock crashes to ₹300 as the business weakens.
The rational move: sell, accept the ₹200 loss, and reinvest in a stronger company.
Instead, you hold. Selling feels like admitting you were wrong. The stock becomes more valuable to you simply because you own it.
The result is often that the stock slides to ₹100, and you lose almost your entire capital because you were too emotionally attached to admit a mistake.
The selling trap
Real estate is not immune to this bias.
Consider Mr. Sharma wants to sell his independent house, which a broker values at ₹80 lakhs based on area rates.
Mr. Sharma reacts with shock, demanding ₹1 crore because he has celebrated 20 Diwalis there and painted the walls himself.
The problem is that Mr. Sharma is selling memories—like the corner where his son learned to walk—while the buyer is simply buying bricks and seeing a damp wall that needs repair.
Mr. Sharma refuses the market offer. As the house sits on the market for 2 years and the paint peels, he eventually sells it for ₹75 lakh out of desperation.
His pride ultimately costs him ₹5 lakh plus two years of lost .
The electronic graveyard
Hoarding is most visible in our drawers.
It shows up in two forms: the backup phone lie and the cable hoard.
Rohan buys a new iPhone but refuses to exchange his old Android—bought for ₹30,000—for ₹6,000. He feels looted. “The camera is still great,” he tells himself.
So he keeps it as a backup.
What he ignores is simple: electronics depreciate faster than rotting fruit.
The same drawer holds old Nokia chargers, USB-A cables and iPhone boxes he refuses to discard. He overvalues their hypothetical future utility and undervalues present space.
Eventually, the phone turns into e-waste worth ₹0. Meanwhile, he may end up buying new cupboards or paying for storage to house trash, effectively paying rent for items with zero utility.
The infinite almirah loop
We treat clothes like permanent balance-sheet entries.
Mrs. Mehra’s wardrobe is overflowing with heavy suits she hasn’t worn since 2018. Yet she cannot part with an old Anarkali because she paid ₹5,000 for it.
She values the suit by past price, not current utility. Instead of donating unused clothes, she buys a new Godrej almirah for ₹25,000 to create space.
She spends money to store items worth ₹0, and within two years, the new almirah fills up too.
That is the infinite almirah loop: spending fresh money to protect sunk costs.
The stranger test
The Endowment Effect makes us hoard dead assets, hold losing stocks and lose rental income. To beat it, detach ownership from judgment.
Before keeping or selling anything, ask:
If I didn’t own this today, would I buy it at this price?
- For the stock: If you didn’t own Company X, would you buy it at ₹300? If the answer is no, sell.
- For rent: If Mr. Verma were a tenant, would he pay ₹40,000 for his old flat when the building next door offers a pool for the same price? No.
That answer is your clarity.
Stop running a museum
Your home and are not museums. Museums preserve history. Investors allocate for future value.
Every day you hold a dead asset—a losing stock, an empty flat, unused clothes—you are paying a fee to your ego.
Wealth flows to the practical, not the sentimental. Clean the drawer. Sell the junk. Book the loss. Let your money breathe.
Stop paying the emotional tax. Start earning real returns.
Ajay Pruthi is the founder of PLNR Investment Advisors and a Sebi-registered investment advisor.