Lesson · 8 min
Loss aversion
Losing $100 hurts about twice as much as gaining $100 feels good.
This asymmetry makes investors sell during crashes at exactly the wrong moment. The defense is a written plan you follow when your brain wants to panic.
Vocab
- Loss aversion
- Tendency to weigh losses about 2x heavier than equivalent gains.
Quick check
1. Loss aversion pushes investors to…