House Money Effect is the tendency for investors to take more and greater risks when investing with profits.
 | | Term of the Day | Words to Know | | |  | | House Money Effect | | The house money effect is a theory used to explain the tendency of investors to take on greater risk when reinvesting profit earned through investing than they would when investing their savings or wages. People will often think about investment income as separate from money they earned in other ways, which distorts their mental accounting. Because that money is incorrectly considered somehow "extra" or "separate" from money earned in other ways, investors will invest it with a much higher risk tolerance than they would otherwise, thereby skewing their investment decisions. | | Read More » | | Related to "House Money Effect" | | | | Risk Tolerance | | Risk tolerance is the degree of variability in investment returns that an individual is willing to stand. It is an important component in investing. | | Read More » | | | Mental Accounting | | Mental accounting refers to the different values a person places on the same amount of money, based on subjective criteria, often with detrimental results. | | Read More » | | | Behavioral Finance | | Behavioral finance is an area of study that proposes psychology-based theories to explain market outcomes and anomalies. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
/GettyImages-891634254_2400-acea07b464d94bedbd2d7b38f7c55e27.png)
:max_bytes(150000):strip_icc()/Secular-Bull-Market-Secular-Bear-Market-56a092943df78cafdaa2d4cf.jpg)
/GettyImages-932632502-d3c8d3de9b8f45c98718004d0da75eaa.jpg)
No comments:
Post a Comment