Behaviour
Myopic loss aversion
Taking too little risk because you evaluate a long-term portfolio over short periods.
How it works
Over one day, equity returns are near a coin flip. Over twenty years, the distribution of outcomes has historically been overwhelmingly positive.
Someone who checks daily experiences many losses and concludes equities are dangerous; someone who checks annually sees the same portfolio very differently.
Related terms
- Loss aversionThe tendency to feel a loss roughly twice as intensely as an equivalent gain.
- Time horizonHow long until you need the money — the single fact that should shape most of your other decisions.
- Behaviour gapThe difference between what a fund returned and what its investors actually earned in it.
- VolatilityHow much an investment’s returns bounce around their average — the standard measure of risk.
More in Behaviour
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.