Topic.
Understanding investor psychology: risk tolerance vs capacity, loss aversion, panic selling, and behavioural economics applied to investing.
2 articles in this topic
When people talk about how much risk they can handle, they usually mean one thing. But there are actually two distinct questions, and confusing them leads to predictable problems. The first question is psychological: how much volatility can you watch...
A $10,000 loss and a $10,000 gain are mathematically equivalent. They are not psychologically equivalent. The loss feels worse. Much worse. This asymmetry is called loss aversion, and it is one of the most robust findings in behavioural economics. It...
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