What Is Regret Avoidance

[Leviathan.007]

Regret Avoidance is a theory used to explain the tendency of investors to refuse to make poor investment decisions. Avoiding risk can lead investors to invest too poorly for too long, or to add money hoping the situation will reverse and be able to recover losses, thus avoiding regrets. The resulting behavior is sometimes called commitment intensification.





Important Notes:
- Regret Avoidance is the theory that looks at the behavior of investors in securities, a poorly performing currency.
- There is a tendency that investors rather than logical decision, when the assets are invested where they started to fall, take emotional decisions.
- Investors may stick to the poor security plan or pay even more money to it, in the hope that somehow recover the money and grow.
- This behavior indicates the desire to avoid the regret of investing.
- The end result is often that the investor loses more of its loss if it had reduced its loss earlier at the time.

Understand the avoidance of regret:
Regret avoidance is when a person wastes time, energy, or money to avoid feeling remorse for an initial decision. The resources spent to ensure that the initial investment is not wasted can exceed the value of that investment.

Avoid Behavioral Finances and Remorse:
Behavioral finance is the reason why people make irrational financial decisions? Regret Avoidance is an example of irrational behavior. Money is invested or spent based on emotions rather than a rational decision-making process. Investors who exhibit this type of behavior consider the cost of money they spent in the past to be much higher than the money spent in the future to recover previous capital.

Avoid Regret Avoidance Behavior
Having a basic understanding of behavioral finance, developing a strong portfolio plan, and understanding risk tolerance and its causes can limit the likelihood of performing destructive behaviors to prevent remorse.

Source: Investopedia

[bassbity]

precisely in order to minimize the impact of investing in a careless manner will result in an emotional state of regret. but keep in mind that every act and decision always has reciprocity. be it negative or positive in terms of investing or trading this is better known as profit and loss. so it's no wonder that in trading there is always a stop loss method, maybe that's one way to avoid regret as early as possible.
Then if it is seen based on the emotional level of a person who cannot control the anxiety of seeing the price decline, it is called the effect of panic. However, if we refer to the initial characteristics in investing or trading, such a pattern does not need to be used as a foundation, because it will provide a psychological stimulus for someone who has a large financial level in it.

[Mpamaegbu]

To be frank with you OP, no one will knowingly go into a deal that will later turn sour. Failure in business comes up from time to time because man isn't perfect. That's just it. We only become wiser from hindsight. What all these things boil down to is just one thing, "Emotion". Yes, it's emotion. That's what rules every decision we take, whether business or otherwise. Even when we think we can control that emotion we still end up making our decisions based on it. Emotion is what we do, emotion is human and human is emotion. The only difference between a profitable investor and one who isn't is the ability to channel that emotion to the right use.

BTW, regret is a human attribute like emotion too. I don't see how we can completely blank it out.

[kaya11]

To be frank with you OP, no one will knowingly go into a deal that will later turn sour. Failure in business comes up from time to time because man isn't perfect. That's just it. We only become wiser from hindsight. What all these things boil down to is just one thing, "Emotion". Yes, it's emotion. That's what rules every decision we take, whether business or otherwise. Even when we think we can control that emotion we still end up making our decisions based on it. Emotion is what we do, emotion is human and human is emotion. The only difference between a profitable investor and one who isn't is the ability to channel that emotion to the right use.

BTW, regret is a human attribute like emotion too. I don't see how we can completely blank it out.

I agree, it's in the human nature, sometimes we need to lose to feel that we are human and learn from those loses and decisions. I think we would not be able to completely perfect our trading behaviour without experiences and it includes making wrong decisions. I've never heard of a trader that has 0 percent losing capabilities and always win all the time.

[Lanatsa]

To be frank with you OP, no one will knowingly go into a deal that will later turn sour. Failure in business comes up from time to time because man isn't perfect. That's just it. We only become wiser from hindsight. What all these things boil down to is just one thing, "Emotion". Yes, it's emotion. That's what rules every decision we take, whether business or otherwise. Even when we think we can control that emotion we still end up making our decisions based on it. Emotion is what we do, emotion is human and human is emotion. The only difference between a profitable investor and one who isn't is the ability to channel that emotion to the right use.

BTW, regret is a human attribute like emotion too. I don't see how we can completely blank it out.

I agree, it's in the human nature, sometimes we need to lose to feel that we are human and learn from those loses and decisions. I think we would not be able to completely perfect our trading behaviour without experiences and it includes making wrong decisions. I've never heard of a trader that has 0 percent losing capabilities and always win all the time.

It doesn't really need for us to lose in purpose just for us to feel that we are humans, losses are inevitable and you should think of that specially when you are dealing with investments
neither on trading or traditional ones that we've known because its impossible to have a constant profit without any loss.

Regret is indeed an emotion that do usually felt after a certain situation which do lead up for you to miss out something.When it comes to avoidance then this is where

self control and will would really take play.When you do accept out those reality then it wouldn't really be that hard to control it on.

[goaldigger]

We all make mistakes even if we already know how the market works because we are just human and its normal to lose money in this market. Regret avoidance is something we should always practice especially if we do made a mistakes or we act outside your strategies. If you do have strategies to follow, I believe you will regret nothing and you’ll just play by the rules, you must have a rules every time you lose money or you lose opportunities.

[Ryker1]

We all make mistakes even if we already know how the market works because we are just human and its normal to lose money in this market. Regret avoidance is something we should always practice especially if we do made a mistakes or we act outside your strategies. If you do have strategies to follow, I believe you will regret nothing and you’ll just play by the rules, you must have a rules every time you lose money or you lose opportunities.

Well, there is no regret or regret avoidance if you know those circumstances that will happen, in any investment, there must a risk that occurs, in order to manage risk, understand first what you have invested. You are not even a great investor if you always regret or even blaming yourself. But I agree that there should be a strategy plan, when to exit or when to cut your losses if you will come pup at that point. Stick to the plan will always be good advice if you want regret avoidance.

[crzy]

Trading with your emotion will result you to regret your trading decision, so if you already learn how to control your emotion then you can avoid regretting things that didn't turn into your favor. Yes, its normal to human nature but it can still be controlled, so keep improving yourself because trading can really control your emotion most of the time, and if you let that to continue to happen you'll lose money.

[Scripture]

This is a theory is proven and teste to many investors, they keep buying even if they've loss already much money just for a hope that they can recover their losses and regret nothing, which is really not a good idea especially on investing without the knowledge.

Regrets is normal, but being greedy is not good most of the time, if you don't want to regret then equip yourself with the right information and trade accordingly without putting too much pressure on yourself.

[CryptocurencyKing]

There is a likelihood of the regret avoidance theory being a common similarity between investors as it is also the desire of every investor not to loose or not get a profiting return on investment (ROI). For this reason, most investors are more likely to stay on a trade or investment longer than supposed and as such, when it continues to go sideways (in a depleting direction), you tend to boost your capital by investing more and more funds with hoe that, you would get a multiple result for your investment but unfortunately,  it could go down the drain all together.
The Regrets Avoidance theory goes a long way to teaching an individual how to manage and determine when an investment is bad.

[Maus0728]

This has something to do about rewiring our mindset with regards to taking an investment or trading strategies. Most often, people overlooked the importance of having a strong mental framework when it comes to trading. They often neglect the need of having a constant evaluation of their emotions before and after their trades. Funny thing is, a lot of people say that we need to separate or perhaps completely remove the emotions from trading but how can we completely do that?

So far, this is the most comprehensive and honest guide that you can find on the internet. It's actually a video playlist that tackles the ins and out of the psychological framework when we do some trading along with a worksheet in order to properly assess what are the mistakes and correct decisions that we have made.

[1] Mental Analysis Evolved
[2] Worksheets

[davis196]

Investors may stick to the poor security plan or pay even more money to it, in the hope that somehow recover the money and grow.

This seems more like the "sunk cost fallacy",when we stick to something,only because we have invested time,money and efforts and we don't want to let it go,because all the money,time and efforts,that were invested will be wasted in the end.
You can call it '"regret avoidance",but it's basically the "sunk cost fallacy" theory.
Feeling regrets is inevitable.Making wrong decisions is inevitable sometimes.Learning from your mistakes and improving yourself is what makes successful people stand out from the crowd.

[Wexnident]

Understand the avoidance of regret:
Regret avoidance is when a person wastes time, energy, or money to avoid feeling remorse for an initial decision. The resources spent to ensure that the initial investment is not wasted can exceed the value of that investment.

I dunno, avoiding it seems like the one to be the waste rather than facing it. I mean, failure is the mother of success no? It might be a bit more difficult to accept when it comes to trading, mostly because what we're losing is money, but it should still apply to it imo. We just place a different level of importance in money compared to others in most scenarios hence why it's much more difficult to accept I think. Well, there's also a different take into remorse where you just think of what if scenarios instead of thinking what steps you need to do afterwards.

This has something to do about rewiring our mindset with regards to taking an investment or trading strategies. Most often, people overlooked the importance of having a strong mental framework when it comes to trading. They often neglect the need of having a constant evaluation of their emotions before and after their trades. Funny thing is, a lot of people say that we need to separate or perhaps completely remove the emotions from trading but how can we completely do that?

Shouldn't it be the complete opposite? Rather than removing it, it'd be better to actually be able to control it. Removing it basically means running away from it, avoiding it, but there would always be instances where you can't do that, what will you do then? It'd be better to face it early on rather than avoid it and suffer major losses due to ignoring it in the later run imo.

[maxreish]

The first thing we should have in mind when investing is the "acceptance of any risks". In that way, the regret will be avoided in times that unexpected movement happens. This actually makes sense, being optimistic even there are times that our investment doesnt go well and then we still continue and disregard the regret will go in positive ways.

But, is the guts and regret feeling depends on how the investment  is leading. For example, your investment go down and can not be recovered, deficit in other term. Determine other resolution and add some ideas to not lost it all. Back up plan is also important.

[palle11]

Investment is all about risk we take and it can come up to success or regret. If we dual on the regret when we lose then we may not stand up to another investing opportunity, that is where we not to put our emotion on check. No need we regret to avoid taking a risk or take a risk and regret midway, we have to understand life that way and stand firm to our decision. If you can not control your emotion however, you see every opening or advise as investing opportunity even when failure is in our front but we can't seem to be realistic to it because of emotion and greed. But if we take emotion under control, we are likely to get our investment right most times than we regret or lose. In trading likewise it is operational. Our emotion if not checked, we can dive in all the time and get burnt all the time.

[danherbias07]

I thought this was it.
I had the bad emotions lately of regrets and imagination of what if's. It's because of the huge chunk of BTC I sold at $30k.
The feeling of regret is still lurking around but I am trying to recover from it. It's quite depressing most of the times.

This is different though. It's like putting more wood in the fire instead of just using the fire extinguisher.
I think it does work but will be too risky. It will depend on the history of the invested coin if there are times it did push back up.

[AicecreaME]

This is the bridge to your greed. Regret avoidance is the one that feeds our ego to continue what we started even though we didn't have a plan because we have in our mind that once we stop, our efforts would go to waste, etc. but the truth is we're just walking blind in the dark because of regret avoidance.

The other example of it is if a person reminds the other person that he is addicted to something but he always choose to ignore the fact that he is addicted just to continue what he is doing.

[Hippocrypto]

This is the bridge to your greed. Regret avoidance is the one that feeds our ego to continue what we started even though we didn't have a plan because we have in our mind that once we stop, our efforts would go to waste, etc. but the truth is we're just walking blind in the dark because of regret avoidance.

The other example of it is if a person reminds the other person that he is addicted to something but he always choose to ignore the fact that he is addicted just to continue what he is doing.

To make our foundation in trading more stronger, don't listen to your fear, but rather make it as your strength to face every challenges. If your efforts could be wasted, trait that as your inspiration to pursue dreams and don't let failure as the hindrance to success. Once you experienced everything, ups and downs would not be a problem as long as you're equipped with knowledge.

[GreatArkansas]

Note to everybody: It is a THEORY that can be considered as a belief or practice by other people.
But OP still got some point, sometimes our emotional decisions may affect how we decide in investment or having poor of decision, like changing everytime, no plan, and does not stick to plan at all.

[nelson4lov]

Note to everybody: It is a THEORY that can be considered as a belief or practice by other people.
But OP still got some point, sometimes our emotional decisions may affect how we decide in investment or having poor of decision, like changing everytime, no plan, and does not stick to plan at all.

Yeah, what OP said made some sense and I understood the point that he was trying to drive home and it's a critical topic in both trading and investing that is overlooked majority of the time.  More often than not, people shy away from taking responsibility from their poor trading/investing decisions just to avoid regrets and feelings that they were wrong and that's something we have to come to terms with at some points in our career whether we're investing or trading.

I'm guilty of this sometimes that's why I can relate to it.