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I once held a stock for five years — not because it was still the best investment, but because it had become my investment.
The stock was Kanste, a Chinese A-share. It lost money for most of those five years. I kept telling myself the thesis was intact, that patience would be rewarded, that the fundamentals would eventually show up in the price.
What I couldn’t see clearly until much later: I wasn’t analyzing Kanste anymore. I was defending it. Every piece of bad news got minimized. Every piece of good news felt like vindication. I had crossed the line from investor to owner — and I didn’t notice when it happened.
Behavioral economists have a name for this: the Endowment Effect. The moment you own something, your brain revalues it upward. Not because the asset changed. Because you changed.
It took me five years and real losses to fully understand what that means in practice.
Then Innolight Dropped 16% This Morning
Today, I watched Innolight (300308) fall 16% in a single session.
Last year, an AI told me Innolight was worth researching seriously. I didn’t follow up. It went on to triple.
So this morning, watching it drop, my first thought was: good — maybe it’ll fall another 10% so I can get in cheaper.
Then I bought some shares.
And almost instantly: okay, please go up now.
I caught myself mid-thought. Twenty minutes earlier I was rooting for a crash. Now I was mentally begging for a rally. The company hadn’t changed. My analysis hadn’t changed. The only thing that changed was whether I was holding shares.
I started laughing. Because I’d seen this before. I’d lived it for five years with Kanste.
The Elevator Principle (my own mental model)
Here’s the mental model I use to describe this. I call it the Elevator Principle — not because it comes from a textbook, but because I arrived at it from watching my own behavior.
Before you step into an elevator, you want the doors to stay open. Wait for me. Don’t close yet.
The moment you step inside, you want them to close immediately. Come on. Stop letting people in.
The elevator didn’t change. The building didn’t change. Your opinion about the door reversed in under a second — the exact moment your position flipped from outside to inside.
Stock markets work the same way. Your position determines your preference. Your preference shapes your perception. And your perception, if you’re not careful, starts to look like analysis.
The Four Forces Behind the Flip
Four psychological mechanisms drive this pattern. Naming them doesn’t make you immune — but it gives you a chance to pause before acting on them.
1. The Reference Point Effect
When you don’t own a stock, your mental reference point is your future purchase price. A falling stock means cheaper entry, larger potential upside. The drop is good news. Every percentage point down expands your margin.
2. Pre-Purchase Loss Aversion
Your biggest fear before buying: you buy now and it keeps dropping. So you root for the decline. You want the price to validate your patience.
3. The Endowment Effect
The moment you own shares, your brain reprices them upward. The stock goes from “thing I want to buy cheaply” to “my asset.” Studies show people demand roughly twice as much to sell something they own compared to what they’d pay to acquire it.
I held Kanste through years of losses because of this. Not strategy. Not conviction. Ownership.
4. Confirmation Bias Under Ownership
Once you’re holding, you unconsciously filter information. Bad news gets minimized. Good news gets amplified. With Kanste, I read every earnings report looking for signs of a turnaround. I found reasons to stay. I became very good at finding reasons to stay.
Three Mistakes This Creates
Waiting too long for a lower price. You want it to drop 10% before buying. It drops 5% and reverses. You miss the entry because you treated a preference as a prediction.
Paralysis when it actually drops. Today, Innolight dropped 16%. Everyone waiting for “a bigger dip” suddenly faced a real one — and many didn’t buy, because the actual decline felt like evidence of more to come. The dip they wanted became a signal they feared.
Staying too long after buying. This was Kanste. I wasn’t holding because the thesis was strong. I was holding because selling meant admitting I was wrong. I was protecting my ego instead of my capital.
Questions I Ask Myself Now
I don’t try to eliminate these biases. You can’t. But I’ve built a set of questions that force me to look from the other side before acting.
Before buying:
If I already owned a full position, what risks would be worrying me right now?
While holding:
If I owned zero shares today, would I buy this at today’s price? Yes or no?
Am I holding because the thesis is intact — or because I can’t face the loss?
Before selling:
Am I selling because the thesis changed, or because I’m scared?
What evidence would actually change my mind? Have I written it down?
These questions don’t give you the right answer. They slow down the automatic flip — the one that happens the moment your position changes.
What I Did Differently This Time
Before buying Innolight this morning, I wrote down my actual reasoning — the thesis, the risks, the price levels where I’d add or exit. I wanted the pre-purchase version of me to bind the post-purchase version. The pre-purchase version is more skeptical. That’s the one I trust more.
I also asked five AI models to stress-test the thesis before I acted — not to get permission, but to hear the bearish case clearly before ownership would make me want to minimize it.
→ Before Buying Innolight (300308), I Asked 5 AI Models the Same Four Questions
The Pattern Goes Beyond Stocks
- Before buying a house: you want prices to fall. After buying: you track listings hoping for appreciation.
- Before getting a job offer: you want the salary range to be high. After accepting: you become irrationally loyal to the company’s prospects.
- Before having kids: you want honest school ratings. After enrolling your child: you become defensive of the school you chose.
Position determines preference. Preference shapes perception. It’s not weakness — it’s how human cognition works under conditions of ownership and stakes.
The only move is to name it when it happens. Catch the flip. Then ask the question from the other side before you act.
This is part of my Investor Psychology series — where I document real psychological traps using my own portfolio as the case study. Next up: Confirmation Bias, and why I kept ignoring Innolight’s warning signs last year.
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