Understand loss aversion before it drives a money decision: test your skills
Losing $100 tends to feel worse than gaining $100 feels good. Knowing this helps you avoid panicked decisions. Answer each question to see the explanation; your score appears at the end.
This test checks that you can
- Recognise loss aversion
- Use the “would I buy it today?” reframe
- Set rules before markets fall
- Practice
1. Loss aversion means…
- Practice
2. A useful reframe is…
- Practice
3. When should investing rules be written?
- Key idea
4. Which statement best explains "Losses shout, gains whisper"?
- Key idea
5. Which statement best explains "What you paid is history"?
- Key idea
6. Which statement best explains "Rules beat moods"?
- Action plan
7. In the action plan, which step comes first?
- Mistake to avoid
8. Which of these is a mistake this lesson warns against?
- Mistake to avoid
9. Which of these is a mistake this lesson warns against?
An investment falls from $5,000 to $4,000. What percentage gain gets it back to $5,000?
Show the answer
25%
$1,000 ÷ $4,000 = 0.25.
Write one rule you will follow the next time an investment falls 20%.