LOSS AVERSION · REGRET
Avoiding regret
Confirmation that you were wrong hurts more than the loss
Scores on the four axes
The axis this page explains
Avoiding regret
how much you try to avoid situations that would confirm you were wrong
Answer the questions and your scores on all four axes will appear here.
What it means
What you try to avoid is not the loss itself but regret. The scene of a stock rising after you exit, of others making money on something you passed over, the moment you have to admit you were wrong: these loom larger than the size of the outcome. So you often choose to put a decision off rather than make it.
What is unusual about this axis is that it hides the fact that putting off is also a decision. Leaving a position as it is is not doing nothing but deciding to keep holding it, yet the stronger the regret avoidance, the more only the first feels like a decision. A sense forms that if you did nothing, you cannot have been wrong.
The difficulty of changing a decision you have told others about comes from the same place. What you are protecting then is consistency, not judgment, and when the company changes you bend the reasons to match your words rather than change your words.
How it shows up
- You have several times failed to act when you thought you should exit, worried it would rise further
- A stock you missed rising hurts more than a stock you held falling
- A stock you told people you hold is hard to let go of even after your view changes
What research has seen
In Odean’s 1998 analysis, outside December investors realized about 14.8% of their gains but only about 9.8% of their losses, leaning toward cashing in winners and holding on to losers. Interestingly, in December the ratio flipped: realized gains dropped to 10.8% and realized losses rose to 12.8%. When taxes gave a reason to lock in a loss, the same people acted the other way, which is read as evidence that this tendency is not a fixed personality but a tilt shaped by circumstances.
Adjusting the process rather than the temperament
- Before deciding, first write the sentence saying which broken condition would make you change your mind. Changing later then becomes a planned step rather than a reversal
- Record holding as a decision too, in one line. Write that you decided to keep holding today, and putting off starts to look like a decision
- When you tell others, share the reasons, not the conclusion. With the reasons said out loud, the conclusion is much easier to change when the reasons change
When not to trust this score
The wish to avoid regret is not something you can remove. What is worth working on in this axis is not the size of the feeling but whether the fact that you put off a decision ends up in your records.
This test measures answers you report yourself, not actual behavior. One thing research on psychological biases has pointed out again and again is that people expect themselves to act more calmly in such situations than they actually do. A low score does not mean the bias is absent.
Axis scores are relative values for comparing the axes with one another. If all four axes come out at 30, it may mean the biases are weak, or that you have not yet been in the situations the questions ask about.
Having a strong bias and losing money are different things. This test does not predict outcomes and gives no answer about what to trade.
More on Jupick
What the other three axes measure
This assessment is reference content that describes investor psychology. It is not a suggestion to trade any stock or product and not investment advice. Investment decisions and their responsibility rest with you.