Loss aversion: losing hurts more than winning feels good

Behavioral economists have a name for a pattern almost everyone recognizes once they hear it: losing ₱1,000 feels roughly twice as painful as gaining ₱1,000 feels good. This is called loss aversion, and it's one of the most well-documented biases in how people handle money, discovered by researchers studying why our financial choices don't match simple math.

Because losses sting so much harder than equivalent gains feel rewarding, loss aversion pushes people toward decisions that protect against short-term pain rather than decisions that make sense over the long run. It shows up as refusing to sell an investment that's clearly no longer worth holding, just to avoid making a loss official, or as being far more cautious with money than the actual odds would justify.

The bias itself doesn't disappear just because you know about it, but you can work around it. A useful habit is judging each money decision by what makes sense going forward, not by whether it locks in a loss you've already, in reality, already taken on paper.

Someone bought ₱50,000 worth of shares in a company two years ago. The shares are now worth ₱35,000, and the company's outlook has clearly worsened. A purely forward-looking investor would move that ₱35,000 into something with better prospects, but loss aversion keeps them holding on, unwilling to 'lock in' the ₱15,000 loss by selling, even as the shares slide further to ₱28,000.