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Let us understand why with the help of a coin toss example
Heads - You win Rs. 10,000
Tails - You lose Rs. 10,000
Would you take this bet?
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Heads - You win Rs. 10,000
Tails - You lose Rs. 10,000
Would you take this bet?
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Most of us would NOT!
Why?
Because, the psychological impact of losing Rs. 10,000 is much stronger than the benefit of winning Rs. 10,000.
This tendency is referred to as ‘loss aversion’.
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Why?
Because, the psychological impact of losing Rs. 10,000 is much stronger than the benefit of winning Rs. 10,000.
This tendency is referred to as ‘loss aversion’.
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There are essentially three key ingredients for building wealth - Savings rate, Time & Returns
Out of these, most of us spend the maximum time & effort on improving the third ingredient – RETURNS
But, there is however a small underrated problem here..
#FIThreads
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Out of these, most of us spend the maximum time & effort on improving the third ingredient – RETURNS
But, there is however a small underrated problem here..
#FIThreads
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The returns are NOT completely under our control!
Look at the equity returns in the past four decades…
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Look at the equity returns in the past four decades…
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Let us check the debt returns for the past four decades…
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