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Why Your Brain Sabotages Investing Decisions: A Deep Dive into Prospect Theory
Manage episode 520896536 series 2837129
In this episode of Wealth Coffee Chats, host Emily Miller breaks down the behavioral psychology that quietly shapes every property investor’s decisions. Drawing on Nobel-prize-winning research from Daniel Kahneman and Amos Tversky, Emily explains prospect theory—why losses feel twice as painful as gains feel good, why we compare ourselves to the wrong things, and why small short-term costs often overshadow huge long-term benefits.
If you’ve ever hesitated on a great deal, stressed over small numbers, held on to the wrong property, or worried more about doing the “wrong” thing than pursuing the “right” one, this episode will hit home. Learn how understanding your own psychology—and having a strategic coach—can help you overcome fear, bias, and procrastination to make confident wealth-building decisions.
Episode Highlights
- Intro to Prospect Theory: How Kahneman & Tversky transformed our understanding of decision-making.
- Loss Aversion: Why losses feel 2–2.5x more painful than equivalent gains—and how this fuels investor hesitation.
- Reference Points: How expectations and comparisons distort emotional reactions to financial outcomes.
- Diminishing Sensitivity: Why small upfront costs feel huge, while long-term gains barely register.
- Risk Preferences: Why people become risk-averse when gaining but risk-seeking when facing potential losses.
- The Power of Coaching: How a clear strategy and professional guidance neutralize emotional decision-making and anchor choices to your long-term goals.
436 episodes
Manage episode 520896536 series 2837129
In this episode of Wealth Coffee Chats, host Emily Miller breaks down the behavioral psychology that quietly shapes every property investor’s decisions. Drawing on Nobel-prize-winning research from Daniel Kahneman and Amos Tversky, Emily explains prospect theory—why losses feel twice as painful as gains feel good, why we compare ourselves to the wrong things, and why small short-term costs often overshadow huge long-term benefits.
If you’ve ever hesitated on a great deal, stressed over small numbers, held on to the wrong property, or worried more about doing the “wrong” thing than pursuing the “right” one, this episode will hit home. Learn how understanding your own psychology—and having a strategic coach—can help you overcome fear, bias, and procrastination to make confident wealth-building decisions.
Episode Highlights
- Intro to Prospect Theory: How Kahneman & Tversky transformed our understanding of decision-making.
- Loss Aversion: Why losses feel 2–2.5x more painful than equivalent gains—and how this fuels investor hesitation.
- Reference Points: How expectations and comparisons distort emotional reactions to financial outcomes.
- Diminishing Sensitivity: Why small upfront costs feel huge, while long-term gains barely register.
- Risk Preferences: Why people become risk-averse when gaining but risk-seeking when facing potential losses.
- The Power of Coaching: How a clear strategy and professional guidance neutralize emotional decision-making and anchor choices to your long-term goals.
436 episodes
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