What is sentimental value?
Sentimental value is how much worth is placed on an item without properly taking into account its monetary value. For example, photographs usually cost very little, but their sentimental value can be priceless. The value is emotional, not logical.
Key takeaways
-
Sentimental value is emotional worth placed on items without considering monetary value, like priceless photographs that cost very little.
-
Financial advisers warn against making investment decisions based on emotional reasons rather than logical strategies like diversifying your portfolio.
-
People often confuse sentimental value with market value for their own businesses or homes, expecting others to value them equally.
-
High investor sentiment drives up bidding premiums, creating opportunities for business owners to sell their firms at elevated prices.
Where have you heard about sentimental value?
You may have heard about sentimental value when it comes to investing. For example, if you were looking to invest in a company for a purely emotional reason: for example, it's a company based in your home town – rather than for a logical reason: ie that you're diversifying your portfolio. Your financial adviser may have warned you that you're placing sentimental value on your investments.
What you need to know about sentimental value.
People often confuse sentimental value with market value when it comes to their own business or home. They believe that because they value it so much that others should too.
This also works the other way round with investors. If investor sentiment is high then their bidding premium is also often high too. Business owners can sometimes look to seek to take advantage of the increased confidence by selling their firm while the sentiment – and price – is high.