behaviour investing other


Status quo feels safe. Today feels like yesterday. Auto-pilot is on. Change is hard. Because by changing we are risking status quo in order to gain. The pain of loss is much greater than the allure of gain. We do not feel so bad about losing out on big gains but we desperately try to avoid even small losses.

The differences in how we value risk help to explain why the derivatives, futures markets and junk bonds are worth trillions. Smart investors will buy risk from people at a discount.