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Fear of Losing Money Leads to Very Bad Decisions
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Money On My Mind

Fear of Losing Money Leads to Very Bad Decisions

How to overcome "loss aversion"

Ben Le Fort's avatar
Ben Le Fort
Nov 14, 2022
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Making of a Millionaire
Making of a Millionaire
Fear of Losing Money Leads to Very Bad Decisions
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Loss Aversion Bias
Image created by the author using Canva

“I hate to lose more than I like to win.”

-Larry Bird

Welcome to another installment in my ongoing series called “Money On My Mind,” where I publish articles to help you deal with the psychological aspects of managing money. Check out past editions of the series here.

We continue our exploration of cognitive biases by looking at loss aversion.

Continue reading to learn:

  • What loss aversion is

  • How it prevents you from taking financial risks

  • The unexpected ways loss aversion can destroy an investment portfolio

  • How to overcome loss aversion and embrace a healthy view of financial risk

What is loss aversion?

Loss aversion is the term used to describe the fact that most people hate to lose more than they love to win. This is especially true when it comes to money. If you were given a $100 speeding ticket, it would probably ruin your day, even if you could easily afford it. On the flip side, if your boss told you they were giving you a $100 bonus, I doubt you’d be jumping for joy.

That’s loss aversion.

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