Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTDamilola EsebameSun, August 23, 2026 at 4:37 PM GMT+2 4 min readA stock can look very different six months after purchase, especially when its price has fallen way below the original entry point.Most investors hold on, waiting for the price to recover rather than locking in a loss. A pattern one of the most successful investors alive says causes lasting financial damage. In his 2024 letter to Berkshire Hathaway shareholders, Warren Buffett identified a behavioral pattern he called "the cardinal sin" of managing a business. His late partner, Charlie Munger, had a blunter label for the habit of sitting on known problems and hoping they disappear on their own: "thumb-sucking."Buffett admitted to misjudging businesses, managers, and capital allocation at BerkshireBuffett's candor in the 2024 Berkshire Hathaway annual letter went beyond a single line about thumb-sucking."The cardinal sin is delaying the correction of mistakes or what Charlie Munger called 'thumb-sucking.' Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be," Buffett wrote in the annual Letter.His argument was direct: once you know something is broken, every quarter you wait to act compounds the cost.Berkshire's own Alphabet position illustrates what that delay looks like at scale.At CNBC's "Squawk Box," Buffett called Google "an extraordinary business" with "some aspects of a natural monopoly." Berkshire did not open a position for another eight years.The firm opened its first Alphabet stake in the third quarter of 2025, buying 17.85 million shares valued at roughly $4.3 billion, and by the Q2 2026 13F filed August 14, 2026, that stake had grown to roughly 106 million shares, making Alphabet Berkshire's third-largest holding, in a company Buffett had said Berkshire should have owned sooner.The SEC identified a behavioral bias that explains why investors hold losing stocksBehavioral researchers have given the pattern Buffett described a clinical name that appears in federal investor education materials.The SEC's Office of Investor Education and Advocacy calls it the disposition effect, based on a Library of Congress report the agency commissioned in 2010. The report describes it as investors' tendency to hold losing investments too long while selling winning investments too soon.More Warren Buffett:Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info