Behavioral finance is a growing field with bright minds uncovering irrational decisions humans make. Many errors can be avoided, we just need to be consciously aware of these possible traps.
According to Terrance Odean*, investors usually sell stocks that have gone up and hold onto stocks that have gone down. This is known as the “disposition effect.” Further studies show shares sold tend to keep going up and stocks held continue to drop. This alone leads to most investors getting a lower return on their investments.