Myopic loss aversion: the price of looking

A friend refreshes his holdings app maybe ten times a day.

I check mine about twice a year. We own the same fund. He is miserable and I am fine, and for a while I could not work out why the same portfolio was doing that to him and not to me.

So I pulled the numbers.

Here is the part nobody tells you about an index that climbs over the long run. It still closes red almost half the trading days. Look at it every day and that is what you feel, a coin flip that is usually against you. Stretch the lens to a month and the red drops to about 2 in 5. Stretch it to a full year and it is about 1 in 4. The portfolio did not change. The only thing that changed was how often you opened it.

Now stack one more fact on top. A loss stings about 2.25 times as hard as the same size gain feels good. That is not a saying, it has been measured. So a screen you check all day does not feel neutral even when the market is up more often than not. You feel every red print at double weight and the green ones barely register.

Shlomo Benartzi and Richard Thaler gave it a name. Myopic loss aversion. In one clean test, people shown one year of returns put 40 percent of their money in stocks. People shown thirty years put 90. Same asset. The only variable was how often they looked.

You cannot stop the red days. About half of them are coming no matter what you own. The part you control is how often you decide to feel it. Pick a rule, put it on a schedule, and let it check the weights so you do not have to.

The looking is the tax. Most of us pay it ten times a day

The same idea on a rule that went up

The opening's pattern needs one condition: the thing you own has to rise over the long run. To show it on numbers I can publish, I took the Nifty 50 Equal Weight model from our own lineup, the simplest rule we run, and counted how often it was red over each lens, using month end values from the back test.

More than a third of the months were red. Almost none of the 12 month windows were, and none of the three year windows. A person who looked once a month felt a loss in about 1 of every 3 looks. A person who looked once a year felt one in about 1 of every 16. Same rule, same rupees.

And on two years that went nowhere

The opening is honest about one thing that is easy to skip: the lens only helps when the long run goes up. The last two years on the actual index were a hard test. On NSE's daily closes the Nifty 50 went from 25,127.95 on 14 Oct 2024 to 22,520.45 on 9 Oct 2026.

In a stretch where the index ends lower, looking less does not make the red go away. What it still does is cut the number of times you feel it. Checking daily over those two years meant 255 red screens. Checking at each month end meant 14 red screens out of 24. The loss was the same either way. The number of painful moments was not.

Put a price on the looking

Here is the opening's arithmetic as a small tool. Each look is red with some probability, and each red look counts at 2.25 times the weight of a green one. The output is a rough count of how the year feels, not of how it went.

At 250 looks a year with 48 percent red, the felt score is about minus 140, even though green days outnumber red ones. At 12 looks with 37 percent red, it is close to even, about minus 2. Nothing about the investment changed. Only the sampling did.

A schedule instead of a refresh button

1. Pick the dateOne fixed review day a quarter, or the rule's own rebalance date.
2. Check the weightsIs the mix still where the plan says? That is the only question.
3. Act by ruleRebalance if a band is breached; otherwise close the app.
4. Ignore the restDaily moves are noise for a goal that is years away.

That is what the opening means by letting the rule check the weights. The free Learn module on loss aversion covers prospect theory, the 2.25 figure and how investors can design around it. The post on fund return against investor return shows what the habit costs in rupees when looking turns into acting.