In today’s episode of Matt’s Minutes, we dive into the concept of loss aversion—a powerful psychological principle that explains why the fear of losing often outweighs the pleasure of winning. A study referenced in this video reveals that, on average, people need to win twice as much as they lose to justify participating in any venture with risk. In other words, the emotional sting of a loss can be twice as painful as the thrill of a win.
Understanding loss aversion is crucial in assessing your risk tolerance—how much risk you’re willing to take in your investments and financial decisions. This episode will provide valuable insights into how this behavior impacts the way we approach investing.
To help you assess your own risk tolerance, we’ve attached a unique and fun risk questionnaire for you to take. By answering a few simple questions, you’ll gain a better understanding of your personal appetite for risk. After completing the questionnaire, feel free to email us your risk score or letter at Help@rossfinancialinc.com—we’d love to hear your results and help you apply them to your investment strategy!