Why We Don't Sell Losing Stock

Research published in 1998 by UC Berkeley showed that individual investors were 50% more likely to sell a winning stock than a loser. According to numerous academic studies, mutual fund managers who hold onto losing stocks underperform, on average, by four percentage points annually compared to those fund managers who cut their losses. A study from Northwestern University found that people are much worse at estimating whether a bad investment will produce mild or severe losses than they are at predicting whether or not a winning investment will generate small or large gains.