Sarah, a 30-year-old client, recently experienced significant losses in her technology stock portfolio during a market downturn. Despite her long-term financial goals for retirement, she now insists on moving all her investments into low-yield GICs, stating, 'I can't bear to lose any more money.' What behavioural bias is Sarah most likely exhibiting?

Question: Sarah, a 30-year-old client, recently experienced significant losses in her technology stock portfolio during a market downturn. Despite her long-term financial goals for retirement, she now insists on moving all her investments into low-yield GICs, stating, 'I can't bear to lose any more money.' What behavioural bias is Sarah most likely exhibiting?

Answer options: ✅ Loss Aversion

• Recency Bias
• Anchoring
• Mental Accounting

Correct answer: Loss Aversion

Explanation: Loss aversion describes Sarah's preference to avoid losses rather than acquire equivalent gains, leading her to make overly conservative financial decisions after experiencing a downturn. She feels the pain of loss more acutely than the pleasure of an equivalent gain.