Case Study: Overcoming Loss Aversion and the Desire to Sell When the Market is Down

If we were playing a game and were to offer you a choice of a sure win of $50 or, on the toss of a coin, a chance to win $100 or nothing, while the probabilistic outcome (50% probability of $0 plus the 50% probability of $100) you would likely choose the guaranteed $50 according to scientific studies. After all, it’s a sure thing—you win. But let’s say we change the rules in the second round, and we offer you a sure loss of $50 or, on the toss of a coin, the chance to lose $100 or lose nothing at all, again the same -$50 probabilistic outcome. What would you pick?

Money Talks – June 6, 2020

This week on “Money Talks,” the Henssler Experts discuss the market’s year-to-date performance and the one-year performance. The financial experts have an in-depth discussion on loss aversion and how investors have to fight human nature to avoid selling at the bottom and buying at the highs. The hosts round out the show answering listeners’ questions on Walmart Inc., required mandatory distributions, and Roth conversions.