Aversion

Losing $100 hurts roughly 2x more than gaining $100 feels good

Loss aversion is a psychological phenomenon where the pain of losing is stronger than the pleasure of gaining. This concept is rooted in the aversion principle, highlighting how individuals tend to prefer avoiding losses over acquiring equivalent gains.

Example

Imagine you have $100. Losing it feels significantly worse than gaining another $100 feels good.

Remember this

Understanding loss aversion is crucial for making informed financial decisions and managing emotions related to money.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

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Educational content, not financial advice.

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