Which reasoning is at play when someone still believes in a failing investment despite warnings to sell?

The reasoning at play when someone continues to believe in a failing investment, despite warnings to sell, is wishful thinking. This cognitive bias occurs when an individual holds on to a belief or scenario primarily because they hope for a positive outcome, even when evidence suggests otherwise. In this context, the person may ignore or downplay negative information about their investment out of a desire for it to recover or become profitable again, leading them to maintain their investment despite clear indications that it would be wise to sell.

Wishful thinking can often cloud judgment, causing individuals to base their decisions not on rational analysis of the situation, but rather on their hopes and desires. This tendency can result in a failure to act in one's best financial interests, as reality may conflict with their optimistic outlook. Recognizing this bias can help individuals make better choices based on facts and evidence rather than emotions.