There are so many areas in life where we know we can reduce losses and avoid harm by taking preventive action, yet we wait and wait until it is too late. Think of disability insurance which costs relatively little when compared to the potential loss of income if we become temporarily or permanently disabled. Or think of medical health checks that can detect illnesses like diabetes or heart failure well before they become a serious problem yet so many people never get one of these inexpensive check-ups. Or think of investments in our portfolio that continue to underperform yet we stick with them until the losses have become so big that we cannot ignore them anymore.
Couldn't agree more. This is so true not only in investment but in other aspects of life ..our health, relationship etc.
Psychology, money and humans...The Dutch are notoriously over-insured and they also save like mad.
And most of them have funeral insurance although they can easily pay for it from their savings...
The day economists realise they're psychologists will mark a significant improvement of the field.
interesting analogies and good heads-up to the referred study. That said, for retail investors, the danger of overtrading might be bigger than that of ignoring losses?