Short-Sighted Loss Aversion Hinders Long-Term Investment

Short-sighted loss aversion hinders long-term investment. Investing with leverage amplifies current profits, but the debts that must be repaid in case of failure take away future opportunities. Dalio analyzed that the debt cycle is the fundamental cause of economic crises. At the individual level, margin trading and loan investments follow the same principle. Investing with debt causes one to lose the greatest weapon: time. The more frequently one checks their accounts, the more emotional they become. Investment psychology is a field that studies the emotions, biases, and decision-making processes of investors, and it is a subfield of behavioral finance. It deals with the impact of fear and greed on investment decisions, crowd psychology, overconfidence, and regret aversion. Notable works include Mark Douglas's "Trading in the Zone" and Daniel Kahneman's "Thinking, Fast and Slow." Research shows that over 90% of investors in the market trade emotionally, suggesting that the ability to control emotions is a key variable that determines investment performance.

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