How Loss Aversion behaviour can destroy your wealth
We spend a huge amount of time trying to make smart decisions with our money. It is possible that we could add just as much value—if not more—by avoiding dumb ones. You, as an investor, must get acquainted with Loss Aversion. It holds that all else being equal, losses fundamentally loom larger than gains. People talk about risk aversion. But there is also something call loss aversion. It is not that people don't like taking risks. What people don't like is losing things. We feel losses twice as keenly as we feel gains. So, we hate losing Rs 100 as much as we like making Rs 200. People that go into casinos can validate that when you go in at the start of the night, people tend to spend their chips at the roulette table very carefully, and try and lose money as slowly as possible. But when they get to the end of the night, they just have a few chips left in their pocket, they tend to go for really high risk bets. So, people move from being risk averse at the beginning of the e...