What Do Toss Cushions and Investments Have in Common?

I'm a sucker for a great toss cushion. Need a bit of colour in your living room? Toss cushion. Need a touch of texture in the bedroom? Toss cushion. Need a pop of personality on that entryway bench? Toss cushion! (Can you tell I used to work for a decor magazine?)

I admit that I own more cushions than I need, but I have an excuse: the sale rack.

When I spot a plush square with a graphic pattern that's just the right shade of blue and it's on clearance, experience tells me I can't pass it up – I'm only human. The right mix of throw pillows keeps my home decoratively current and relevant. Some cushions are standbys that I've had for years, but most are on rotation – so I've forever got my eye out for new ones. To me, the right throw pillow symbolizes the opportunity to meet my overall goal: the perfectly decorated home.

The mesmerizing pull of what we perceive to be a well-priced investment can feel similar. As happens to me in the toss cushion aisle, a so-called attractive price could distract investors from their big-picture needs. But, of course, investments are much more complex than toss cushions.

Here's what RBC behavioral economics expert Michael Sherman has to say to investors contemplating a "sale item" for their portfolio: "If you see value, and if you have a rational reason for buying an investment that will complement your other holdings, then by all means, that could be a great opportunity," he says. But, says Sherman, if it is likely to clash with your portfolio or if you haven't done your research to understand what you're buying, it may not be the right fit. (Sigh… I guess I'll put back the discounted sassy little faux fur bolster that doesn't support my decor scheme and I have no clue how to clean.)

And most important ask yourself, is this thing even on sale? In other words, how much should that toss cushion cost anyway? Sure, $25 may seem like a low-low price if the last few throw pillows you purchased cost you $50, but that's just confirmation bias at play. If you anchor yourself to a price, the "less than" price can create the impression of value where value may – or may not – be.