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A lesson on behavioral investing.
Common mistake majority investor makes without knowing it.
A small thread
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Common mistake majority investor makes without knowing it.
A small thread
It& #39;s a situation where you continue to do something painful just because “you’ve already been doing it”.
For ex. You buy a stock at â‚ą1,000 of Company X.
Few months later, there’s a market crash and the value of Company X drops to ₹800.
For ex. You buy a stock at â‚ą1,000 of Company X.
Few months later, there’s a market crash and the value of Company X drops to ₹800.
You identified that the market condition has changed and there’s better opportunity with other companies.
But still, instead of selling the Company X, you hold on to it.
Because it’s painful to book a loss of your hard-earned money with your own hands.
But still, instead of selling the Company X, you hold on to it.
Because it’s painful to book a loss of your hard-earned money with your own hands.
The market recovers and other stocks have risen from â‚ą1000 to â‚ą1500. Your stock is at â‚ą700.
You can’t get the lost money back. However, you still hold it with a hope that it’ll recover.
That’s sunk cost trap.
You can’t get the lost money back. However, you still hold it with a hope that it’ll recover.
That’s sunk cost trap.
This is because we’re hardwired to be loss averse.
In short, a loss of hard-earned â‚ą200 is more painful than the enjoyment of â‚ą200 profit from the markets.
In short, a loss of hard-earned â‚ą200 is more painful than the enjoyment of â‚ą200 profit from the markets.
Successful investors deal everyday as a new game with the fund they have in their portfolio.
Learning the lessons from the past and avoiding emotions.
It’s much better to cut your loss quickly and increase your profits than to keep on holding, only to lose more.
Learning the lessons from the past and avoiding emotions.
It’s much better to cut your loss quickly and increase your profits than to keep on holding, only to lose more.
