Loss Aversion Test — Do Losses Hurt More? Free 10 Questions
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A 10-question investing-psychology check of loss aversion, the tendency to feel a loss more than an equal gain. A high score isn't bad in itself, but it can feed habits like refusing to cut losses. About 2 minutes, free.
What's included
- Questions
- 10 items
- Price
- Free
- Areas measured
- Loss Aversion Tendency
Loss aversion, looked at through 10 questions
The Soundary Loss Aversion Scale (S-LAS) looks at the tendency to feel a loss more strongly than a gain of the same size, and to let decisions tilt toward avoiding that loss. The 10 items touch on four patterns: the emotional weight of losses, such as distress and anxiety; clinging to break-even, holding a losing position because selling would 'make the loss real'; backing away from an opportunity with a good expected return as soon as any risk to your principal appears; and parking more money than you need in products that guarantee your principal.
Thinking about your recent investing and your attitude toward money, you answer each item with 'not at all' (0), 'a little' (1), 'quite a bit' (2) or 'very much' (3). There are no reverse-scored items: the 10 answers are simply added up into one total from 0 to 30, and a higher score means a stronger tendency toward loss aversion. Soundary developed the items itself around the concept of loss aversion; they are not a translation of any standardized scale.
Reading the four bands from 0 to 30
A score of 0–7 is 'Low / Balanced': you take losses and gains fairly evenly. 8–15 is 'Moderate': mostly balanced, though a large loss can occasionally push you toward avoidant choices. 16–22 is 'Somewhat High', where it is easy to put off a stop-loss or tilt toward safe assets, and 23–30 is 'High', where fear of loss can strongly steer your decisions. The band cut-offs are Soundary's own reference thresholds, not population norms.
Loss aversion is not a flaw to be fixed but a neutral disposition. When it is strong it can protect you from big mistakes, but it can also make you postpone a necessary stop-loss or pass up good opportunities; and when it is weak, that does not mean your risk is automatically well managed. Recent experience also affects the score: right after a big loss, in the middle of a falling market, or when the amount invested is large enough to strain your daily life, it may come out higher than usual.
From prospect theory to your next retake
The concept of loss aversion goes back to prospect theory, published by Kahneman and Tversky in 1979. It holds that people judge outcomes not by their total wealth but by how much they gained or lost relative to a reference point, and that a loss feels heavier than a gain of the same size. In 1991, the two showed that this tendency appears not only in risky choices such as gambles but also in riskless everyday choices, such as trading away or giving up something you already own.
Dispositions change slowly, so retake the scale every 6 to 12 months, or after a big loss or a sharp downturn, and compare it with your previous result. Whatever your score, writing the potential gain and the potential loss side by side before a decision, and fixing a loss limit in advance as a percentage rather than an amount, can reduce choices driven by emotion. This result is a reference for self-understanding only. It is not investment advice or a financial recommendation, and investment decisions and their outcomes remain your own.
How scores are interpreted
Loss Aversion Tendency
This is your total score for loss aversion tendency. The higher the score, the more intensely you feel losses compared to equally sized gains, increasing the likelihood of trading biases such as avoiding stop-losses, overallocating to safe assets, and obsessing over breaking even. This is not an abnormality but an investment tendency; being aware of it helps you make more balanced decisions.
0–7pts · Low / Balanced
You tend to perceive losses and gains in a relatively balanced way. You are not heavily swayed by the fear of loss, allowing you to execute necessary stop-losses or take reasonable risks with relative composure.
8–15pts · Moderate
You generally maintain a balance, but you may occasionally make evasive choices in the face of large losses. Writing down and comparing the potential gains and losses before making a decision can help you judge more calmly.
16–22pts · Somewhat High
Your desire to avoid losses is somewhat strong. You may delay cutting losses or lean too heavily toward safe assets. Setting principles in advance, such as stop-loss limits and investment proportions, will help reduce bias.
23–30pts · High
The fear of loss heavily influences your judgment, which can lead to irrational trading biases. This is merely a personality trait and not a fault. If necessary, it may be helpful to re-evaluate your investment principles or consult with a financial or psychological professional. Take the test again after some time to observe any changes.
Sample questions
- 1. The pain of a loss feels much greater than the joy of an equally sized gain.
- 2. I rarely sell losing investments because selling feels like locking in the loss.
- 3. I hesitate to invest if there is even a slight chance of losing my principal, even if the expected return is high.
- 4. Even when I need to cut my losses, I keep delaying the decision, thinking "it will go back up."
Reflecting on your recent attitudes toward investment and money, please answer honestly how closely each statement describes you. There are no right, wrong, good, or bad answers.
FAQ
Is a high loss aversion score a bad thing?
No. Loss aversion is a common disposition that most people have to some degree, and a high score also means you have a strong pull toward caution in the face of loss. From 16 points upward, though, it can carry costs, such as putting off a stop-loss or staying too long in safe assets, so it helps to set rules such as a stop-loss level and position size in advance.
Can I take it if I have never invested in stocks?
Yes. Some items ask about investing situations such as positions and stop-losses, but habits like picturing the loss first or tying money up where the principal is guaranteed also show in savings and big spending decisions. If you have never invested, answer by thinking of how you usually react when facing a choice that could lose you money. Bear in mind that your result may change once you build up real trading experience.
How is this different from the loss aversion area of the Investor Bias Check?
The Investor Bias Check (SIBC) surveys four biases, overconfidence, loss aversion, herding and the disposition effect, with 3 items each, while this scale looks at loss aversion alone in depth with 10 items. That lets you see more concretely how your loss aversion shows up, for example as delayed stop-losses, clinging to break-even or leaning on safe assets. If you are curious about biases beyond loss aversion, take both.
My score changed a lot when I retook it. Why?
That is not unusual. Loss aversion is a fairly stable disposition, but the situation you are in when you answer matters a lot. Right after a big loss or during a sharp market drop you identify more with the loss items, and during a run of gains the opposite tends to happen. If you jot down one line about market conditions and the state of your account each time you take it, you will start to see which situations shake your judgment.
Source
The items in this test are a self-check adaptation based on the original instrument and literature below: Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. / Tversky, A., & Kahneman, D. (1991). Loss aversion in riskless choice: A reference-dependent model. Quarterly Journal of Economics, 106(4), 1039–1061. — A reference-only self-check whose items Soundary wrote with reference to the original literature on loss aversion. It is not a translation or adaptation of any standardized scale; the score bands are Soundary's own reference thresholds, and the result is not investment advice.
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This is a self-screening tool, not a medical diagnosis. If the result concerns you, please consult a mental health professional.