STATUS QUO BIAS

status_quo_70s_470x353Irrationally wanting things to stay the same, also called inertia.  We do this in part because we want to avoid costs, even when they’re offset by a larger gain, a process psychologists call “Loss aversion”.

You hold onto a mutual fund you inherited (even when you know little about it), despite being aware that an ETF (Exchange Trade Fund) brings you higher returns at significantly lower fees.

You don’t make changes to your portfolio, even when it’s not designed for your goals.  You just want things to stay the same—a dangerous mind-set in a world that’s always changing.

Why?  Pay attention.  Give yourself a push or kick (in case that works better for you).  After all, you also did change your hairstyle for the better (I hope), so why not change your asset structure for the better    (I am certain) as well?

See also Loss Aversion Bias.

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