Loss Aversion

Loss aversion refers to the fact that we feel stronger emotions about losing something than we do about gaining the same thing.

For example: If you found $20 on the ground, you'd be pretty happy. But if you had $20 in your wallet and lost it, you'd be really unhappy.

Loss aversion reveals that losses impact us approximately twice as strongly as equivalent gains. This asymmetry:

• Makes us reject favorable gambles with positive expected values
• Creates the endowment effect where we overvalue what we already possess
• Expl...

Sometimes, it is hard to let go of something valuable without realizing that letting go is greater than we think. 

Sometimes, a loss can feel more powerful than a gain of the same magnitude and vice versa. Considering the pain of a loss – or euphoria of a gain – can weigh heavily on futu...