Make Mistakes. Avoidance is Expensive.

“Errors of Omission are More Costly than Errors of Commission” – Warren Buffett

As we discussed, people tend to hate losing money more than they like making it (i.e. loss aversion). Unfortunately, this protectionism can cultivate very expensive negative biases – costing much more in missed profits than averted losses.

Over the very long term, the odds are in your favour as an equity investor. Developed market equity market indices have pretty much all moved substantially higher over the very long term. There is also an asymmetry to the equity investment cost / benefit profile. When you put $100 into a stock or index the most you can lose is $100, but the upside potential is theoretically limitless. This payout asymmetry is the same reason option prices are positively correlated to volatility.