A price creep can be explained just how it sounds, just needs to be interpreted in terms of the stock market. The initial understanding is when a price increases slowly over time, so what was once a $.10 movie is now $10 over time. Tied in with investing, it is when an investor’s general valuation of an asset increases making them more willing to pay more for it.
The BEST example of a price creep in my opinion are shares of Google. When Google went first public and the stock was under $100, the majority of people (including myself) thought the stock was WAY overpriced. Within months the stock was up to $150 - $200, and I was thinking this is just crazy! As time went on though I found myself more and more willing to pay for the stock at these “crazy” levels.
A price creep occurred, because as the stock continued to climb into the $300s and eventual $400s and now $500+, my valuation of the stock price increased more and more. I eventually bought Google in the mid $400s, and still to this day I think to myself, “Was $85 a share REALLY that expensive?” Obviously, hindsight is always 20/20!
Another great example of Price Creep is GAS! I don’t know about you, but I remember paying $.98 per gallon five years ago for gas, and now just last week I paid $3.49 a gallon and didn’t flinch. As prices increased I became more used to paying higher prices, and now even $2.80 seems “cheap” to me. Darn OPEC and the price gauging…
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