◈ GLOSSARY · MONEY MINDSET
Loss Aversion.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
The well-documented finding that losing $100 hurts roughly twice as much as winning $100 feels good. It's why people hold losing positions too long (selling makes the loss real) and sell winners too early (locking in the feel-good). The honest caveat: loss aversion isn't irrational — it's wired in — but it leads to measurably worse portfolio returns if you don't have rules that override it.
◈ IN PRACTICE
Example
A stock you own drops 30%. The 'rational' move is to ask whether you'd buy it today at the new price. The loss-averse move is to refuse to sell until it 'comes back,' even if your money would compound faster somewhere else. That refusal can cost years of returns.
◈ RECOMMENDED READING
