Why Loss Hurts More Than Gain – A Lesson from Prospect Theory
Daniel Kahneman, Nobel Prize winner, introduced Prospect Theory to explain how we really make decisions.

Imagine this 👇
You find ₹1,000 on the road — you feel happy.
Later the same day, you lose ₹1,000 from your wallet — the pain is much stronger than the earlier happiness.
Logically, net result is zero......Emotionally, it feels like a bad day.

This is Prospect Theory in action.
Key insight:
👉 Losses hurt about twice as much as gains feel good.
That’s why:
• Investors panic-sell during market falls
• People hold losing stocks hoping to “break even”
• We avoid risks when in profit, but take big risks to recover losses

Our brain doesn’t think in absolute numbers.
It thinks in gains vs losses relative to a reference point.
Personal Finance Lesson:
Successful investing is less about predicting markets and more about managing emotions.
If you can control your reaction to losses, you already have an edge over most investors.
Behaviour beats intelligence. Always.