Ken Fisher Explains Myopic Loss Aversion | Fisher Investments

Описание: Myopic loss aversion—sometimes referred to as “prospect theory”—is the idea that humans dislike losses more than they enjoy the gains. This tendency is one explanation for why humans are often so short-sighted—it can help explain why we tend to make a lot of investing mistakes. Learn how to manage this unhelpful tendency in this video with Ken Fisher.
In order to avoid negative market volatility—which investors are sensitive to in the short term because of myopic loss aversion—, investors may try and move in and out of the market. While trying to avoid a downturn may seem like a smart thing to do, investors who sell are often left guessing when the right time to re-enter the market is. When you exit the market, you put yourself at risk to miss some days with the highest returns.
Often times you will hear the media talk about where stocks are headed in the near future rather than what trend they are heading toward in the long run. Paying attention to these headlines can distract you from the goals and objectives you had when you started investing. The truth is, nobody knows where the stock market is headed over the next few weeks, so focusing on that is potentially setting yourself up to fall victim to natural cognitive errors.

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