An RIA like JioBlackRock can guide you through the risk assessment process to determine your Investor Type and then help you build a personalised investment plan that matches your objectives, risk tolerance and investment horizon. RIAs can also help you stay disciplined by providing daily monitoring support and advice, so that short-term market movements don’t lead to impulsive decisions.

The psychology of investing: why losses hurt more than gains feel good

Q: What is loss aversion and why should investors be wary of it?

Loss aversion is a behavioural bias where people feel the pain of a loss more strongly than the joy of an equivalent gain. For investors, understanding loss aversion is important because it can lead them to take decisions that are not in their interests.

Q: How does loss aversion affect investment decisions and behaviour?

Loss aversion can make investors overly cautious or reactive. For example, they might hold on to poor-performing investments to avoid realising a loss, or they might sell winning investments too early to “lock in gains”. This behaviour can limit growth and reduce overall portfolio performance over time.

Q: Why do losses feel more painful than gains feel good?

Humans are wired to respond more strongly to negative events than positive ones — it’s part of our psychology. This sensitivity explains why losses are so hard to accept.

Q: What are some common mistakes investors make due to loss aversion?

• Selling investments too soon after a small gain. • Holding on to poor-performing investments to avoid realising a loss. • Avoiding risk altogether, leading to overly conservative portfolios. • Reacting emotionally to short-term market movements rather than sticking to a long-term plan.

Q: How can I detect loss aversion in my thinking?

You might be affected by loss aversion if you notice yourself: • Feeling anxious or stressed about small market drops. • Hesitating to invest in opportunities because of fear of losing money. • Making impulsive decisions based on short-term losses or gains. • Regularly comparing your investments to others rather than focusing on your own long-term objectives.

Q: How do I avoid loss aversion in investment decisions?

You can reduce the impact of loss aversion by undertaking a risk profile assessment. This helps you understand your unique risk profile and allows you to create a personalised investment plan tailored to your risk tolerance, investment horizon and investment objectives. By having a clear plan, you are less likely to make impulsive decisions.

Q: What is loss aversion?

Have you ever wondered why the pain of losing ₹1,000 (for example) is twice as intense as the pleasure of gaining the same amount? Loss aversion is deeply rooted in our psychology and plays a bigger role in investing than most people realise. For instance, loss aversion can sometimes lead investors to irrational behaviour, like holding on to losing assets or selling winners. Based on the Nobel Prize-winning research by Kahneman and Tversky (Prospect Theory1), loss aversion is one of the most influential concepts in behavioural economics. Understanding how it affects our decisions is crucial for overcoming emotional biases and investing with reason and discipline.

Q: How loss aversion affects investing

Holding on to losers Many investors refuse to sell stocks or mutual funds that have fallen in value, hoping their value will recover. The emotional discomfort of “booking a loss” is so strong that portfolios often get cluttered with underperformers. Selling winners too early Conversely, investors may sell profitable investments too soon to “lock in” gains, fearing those might disappear. When markets rally, some investors redeem early. This means they miss out on compounding, where returns on investments earn their own returns. Disappointment and reactive selling When expectations aren’t met, such as when a portfolio underperforms the Nifty or Sensex market indices*, loss aversion can trigger disappointment, regret and impulsive actions. It’s not uncommon for investors to pause SIPs or exit funds during short-term volatility, even when their long-term objectives remain unchanged.

As humans, we have a natural tendency to feel the pain of losing money far more intensely than the joy of gaining the same amount. Overcoming this emotional bias can help investors to stay focused on their investment objectives with clarity and discipline.

JioBlackRock advantage

Published on 4 May 2026

3 min read

A checklist for recognising and managing loss aversion

1. Acknowledge emotional reactions: Be aware that you may feel more pain from losses than joy from gains, or if you’re holding on to losing investments just to avoid realising a loss.

2. Pause before acting: Before making changes, ask yourself if your decision is driven by fear, regret or a desire to “get back to even”, rather than by your investment plan.

3. Review and rebalance regularly: Set a regular, scheduled time for reviewing your portfolio and do this based on your personal objectives, not market headlines or past returns.

4. Know your Investor Type: A SEBI Registered Investment Adviser (RIA) can help you understand your risk tolerance and design a personalised portfolio that aligns with both your investment objectives and emotional comfort with risk. At JioBlackRock*, We help you to identify what kind of investor you are by asking you to take a risk profile assessment.

Bottom line: Invest with discipline, not emotion

Markets naturally fluctuate, but data shows recoveries often follow declines. Reacting impulsively to volatility can cause investors to miss out when markets rebound. Following an investment plan that is tailored to your risk profile is key to navigating market volatility successfully.

SEBI Registered Investment Advisers (RIAs) can analyse your risk profile assessment and help design a portfolio tailored to your comfort level and objectives, ensuring your investment journey is driven by reason, not emotion. By reframing losses as temporary setbacks within a long-term plan, using historical data~ to show that volatility is normal and encouraging clients to focus on progress rather than short-term fluctuations, RIAs can help investors stay the course.

~Historical data/past performance does not guarantee future returns.

Approval no: 36655

Disclaimer: This article is for educational purposes only.

Questions you might have

What is loss aversion and why should investors be wary of it?

How does loss aversion affect investment decisions and behaviour?

Why do losses feel more painful than gains feel good?

What are some common mistakes investors make due to loss aversion?

How can I detect loss aversion in my thinking?

How do I avoid loss aversion in investment decisions?

How can an RIA help?

What is loss aversion?

How loss aversion affects investing

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