The fear of losing money

Sounds weird, but it’s a fact that (for most people) the idea of losing money feels much worse than the idea of making more. So instead of taking a step forward, we freeze and wait. We tell ourselves that we’ll start later, when things feel safer.

That reaction is very human. It’s deeply rooted in our nature.

Loss aversion, explained simply

There’s a name for the feeling that we just described: loss aversion. Daniel Kahneman and Amos Tversky are the two psychologists that formally introduced this term to the mass.

Loss aversion simply means that our brain experiences losses more strongly than gains. Losing Rs 4,600 hurts more than gaining Rs 4,600 feels good. So we naturally try to avoid situations where a loss is possible… even if a gain is also possible.

Avoiding pain feels like protection. Humans naturally chase protection.

How loss aversion shows up in everyday investing

Loss aversion doesn’t always look dramatic. Most of the time, it’s quiet…

It can look like:

• keeping money in cash ‘just in case’

• waiting for the ‘perfect’ moment to start

• needing to feel 100% sure before investing

• overthinking small decisions for months

From the outside, it looks like caution… but on the inside, it often feels like self-preservation.

Why doing nothing feels safe

Doing nothing feels safe because there’s no visible loss.

When your money stays in a regular bank account, the number doesn’t visually go down. There’s no moment where you feel like you ‘lost’. Emotionally, that’s very comforting.

Your brain will gladly ignore truths that aren’t screaming for attention.

Investing isn’t about avoiding loss completely

A common misunderstanding is thinking that good investing means avoiding losses altogether.

In reality, choosing to invest or not to invest is simply about choosing which risks you’re willing to accept.

• the risk of short-term ups and downs

• or the risk of long-term loss of purchasing power

There is no option with zero risk. There are only different types of risk.

Pou résumé

Loss aversion is not a weakness… it’s a human instinct that pushes us to avoid pain (even when that avoidance causes pain that we might not immediately see).

But thankfully, you don’t need to eliminate fear to start investing.