The Psychology of Investing #19: Surviving Mt. Wealth’s Death Zone

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The Internet is brimming with resources that proclaim, “nearly everything you believed about investing is incorrect.” However, there are far fewer that aim to help you become a better investor by revealing that “much of what you think you know about yourself is inaccurate.” In this series of posts on the psychology of investing, I will take you through the journey of the biggest psychological flaws we suffer from that causes us to make dumb mistakes in investing. This series is part of a joint investor education initiative between Safal Niveshak and DSP Mutual Fund.

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On Mt. Everest, there’s a “Death Zone.” It is the area above 8,000 meters (26,200 feet) where oxygen levels are so low that the human body cannot survive for extended periods. Your thinking starts getting fuzzy and you begin seeing things that aren’t there, and eventually, your systems just… shut down.

In 1987, Ed Viesturs, a young, ambitious mountaineer, was standing in this zone, just three hundred feet from the summit.

For anyone who has never stood in the Death Zone, three hundred feet sounds like a small distance. But at 29,000 feet, where the air can starve the brain of logic, three hundred feet can take hours of agonising effort.

Viesturs had spent years of his life to get to this exact spot. He had endured months of difficult acclimatisation, frostbite-inducing winds, and the constant fear of the mountain. The summit was right there.

But there was a problem. The clock showed the time as 2 PM, which was his self-imposed “turnaround time.” The weather was turning bad and the light was beginning to fade.

Viesturs recalls the moment in his book, No Shortcuts to the Top:

I could see the top. It was right there. But I had a rule. If I wasn’t at the summit by two, I turned around. I knew that if I kept going, I might get to the top, but I might not get back down. My teammates were stunned. They couldn’t believe I was quitting so close to the goal.

Viesturs turned around, descending into the safety of the lower camps. Other climbers, however, possessed by what mountaineers call “summit fever,” pushed forward.

Some of those climbers never came back. They paid the ultimate price for a psychological glitch that we all share, one that is perhaps more dangerous in the modern world than any tiger or storm.

This glitch is the Sunk Cost Fallacy. It is the irrational urge to continue an endeavour—whether it’s a climb, a relationship, or an investment—simply because we have already invested time, money, and effort heavily in it.

We tell ourselves that to stop now would be to waste everything we’ve put in. But, in reality, that investment is already gone. It is “sunk.”

Whether you reach the summit or turn back, those months of preparation and those large amounts of money are already spent. The only thing that should matter is what happens next. But our brains aren’t wired for the future. Instead, they are obsessively anchored to the past.

Now, in investing, we rarely face a literal storm on a mountain, but we face a psychological one every time we see our equity investments, whether stocks or mutual funds, in a sea of red.

Most investors believe they are making decisions based on where a stock is going. But if you look closely at the internal monologue of an investor holding a losing position, you’ll find they aren’t looking at the horizon at all. They are looking at their “buy price.” They are obsessed with a number that exists only in their history.

When a stock you bought at ₹100 drops to ₹60, your brain refuses to see a ₹60 asset. It sees a ₹40 mistake, which needs to be corrected. You tell yourself, “I’ll sell as soon as it gets back to my buying price.”

This “buying price” trap is the financial version of summit fever. When you wait for the stock to return to your original price, you are simply being a hostage to your own ego. The market does not know you bought that stock at ₹100 or even that you still own it. It doesn’t know about your dreams, your financial plan, or the fact that you worked sixty-hour weeks to earn that capital. The investment has no memory, and it feels no obligation to return to the price you paid just so you can feel good about yourself again.

As Viesturs famously wrote:

Getting to the top is optional. Getting down is mandatory.

As an investor, making a profit is your goal, but protecting your capital is the requirement for staying in the game. When you refuse to sell a bad investment because you’ve already “put so much into it,” you are essentially telling the universe that your pride is worth more than your net worth.

The tragedy of the Sunk Cost Fallacy is that it forces smart people to throw good money after bad. We see this constantly with “average-down” strategies gone wrong. An investor buys a company because they believe in its revolutionary technology. The stock drops 30% because the technology fails to materialise. Instead of re-evaluating the new reality, the investor buys more. They tell themselves they are “lowering their cost,” but what they are doing is increasing their exposure to a mistake. They are trying to rescue the first investment by doubling down on a second one.

This behaviour is driven by a deep-seated fear of “realising” a loss. As long as you don’t sell, the loss is just on paper. But the moment you sell, it becomes real, and you can see it in your P&L account. You have to accept that you were wrong. And for the human ego, accepting a mistake feels like death.

Now for the important question: How do you overcome the Sunk Cost Fallacy?

It starts with performing some psychological rewiring.

You must learn to treat your past self like a stranger. The person who bought that stock or fund six months ago was operating with different information and a different mindset. You don’t owe that person anything. You are not obligated to “save” their reputation.

If you woke up tomorrow and found that your entire portfolio had been sold and replaced with cash, would you buy the exact same stocks at their current prices? This test is the only way to clear the fog of sunk costs. If the answer is “no,” then the only reason you are still holding those positions is to comfort a version of yourself that no longer exists.

It’s like paying a daily “ego tax” to maintain the illusion that you haven’t made a mistake. Meanwhile, your capital—the lifeblood of your financial future—is sitting stagnant in a failing investment while better opportunities pass you by.

To do well as an investor, you must have a “Viesturs-like” ability to walk away.

Learn to recognise that the money you’ve already lost is gone, and no amount of wishing, waiting, or “averaging down” will change that fact.

Understand that time is your most valuable asset, and wasting years trying to prove you were right about a bad investment is a far greater loss than any amount of money.

View volatility as a fee and mistakes as tuition. Don’t see a loss as a moral failure, but as a signal that the conditions have changed. And when the conditions change, you change your plan.

Like Viesturs taught, you don’t argue with the mountain. Similarly, you don’t argue with the market.

Viesturs eventually did summit Everest in 1990, in perfect conditions. He reached the top because he was alive to try again. If he had let the sunk cost of his 1987 attempt dictate his actions, he likely would have died on that mountain, just another name on a long list of people who couldn’t let go of a goal that had become dangerous.

He later said in an interview about his 1987 attempt:

I was disappointed that we didn’t go all the way to the summit, but it wasn’t our fault. If you don’t come home, it’s not worth it. And people lose sight of that, you know, ambition overcomes common sense.

Your history is not your destiny. In investing, the cost price is a ghost. The effort you’ve spent is a memory. The only thing that matters is what you do next.

If you want to reach the summit of “Mt. Wealth,” be willing to turn back when the storm rolls in. Also be willing to admit you were wrong and save your strength for a day when the sun is shining.

The market, like the mountain, will always be there tomorrow. The question is, will you?

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Two Books. One Purpose. A Better Life.

• Click here to buy Boundless
• Click here to buy Sketchbook
• Click here to buy the combo (Boundless + Sketchbook)

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Disclaimer: This article is published as part of a joint investor education initiative between Safal Niveshak and DSP Mutual Fund. All Mutual fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (‘RMF’). For more info on KYC, RMF & procedure to lodge/ redress any complaints, visit dspim.com/IEID. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.