I Already made some Loss – so now I choose to make some more

As title says – human nature has strange way of dealing with profits and loss. We have many hidden tendency which make us do stupid things in life, specially in dealing with Loss making situation. Here’s one of the many which doesn’t help in long run.

Human Nature has tendency to risk more in loss situation

Below are the list of examples – I am sure you have faced one of these or similar situation in life – it will be interesting to analyse your decision making process:

Example 1) I have joined 10 day course “How to invest in Stock Market”. I already paid fees of 5000 rupees and fees is nonrefundable. It’s 3 day of the training and I have realized that the training is not worth it. Training instructor is not a trader himself and what he says doesn’t make sense.

Should I continue to attend training next 7 days ?

Example 2) I bought a ticket for Diamond exhibition in Nariman Point. Paid 2000 rupees, of course a non refundable fees. I live in Borivali and its raining heavily since last 5 days. Many trains are canceled and the trains which are running has no guaranty.

Should I take the risk and go for exhibition ?

Example 3) Trains are running late today. I am waiting for train at Malad station for last 30 minutes and train can come anytime. Should I continue to wait for train or go out and take rickshaw or bus ?

Example 4) I paid 50o rupees to buy ticket in black for a first day first show movie at Gaiety Galaxy Bandra. Movie trailer promised a lot, but now I am in middle of movie and this seems like worse movie I have seen in my life.

Should I continue to watch rest of the movie ?

Study shows that when beginners when faced with such situation would choose to wait or delay decision making. Beginners think since I have already invested some amount of (time or money or resource or thoughts or hopes), I should continue to wait more and continue my position. Since I already made some amount of loss I will prefer to make some loss. Examples given above are just examples use them at your discretion, but the idea of post is – if one continues to make decision looking at the background of already made loss then – in a long run you will make lot of not-so-profit-making decisions.

This is similar to idea explain in our post Why You Always Keep Loss Making Product

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