After reviewing her financial plan, a 45-year-old client, Emily, finds that she needs to save an additional $200 per month to meet her retirement goals. However, she refuses to sell a mutual fund that has consistently underperformed for the past three years, stating, 'I can't sell it now, it's about to turn around; I've already lost so much money on it.' What behavioural bias is Emily most exhibiting?

Question: After reviewing her financial plan, a 45-year-old client, Emily, finds that she needs to save an additional $200 per month to meet her retirement goals. However, she refuses to sell a mutual fund that has consistently underperformed for the past three years, stating, 'I can't sell it now, it's about to turn around; I've already lost so much money on it.' What behavioural bias is Emily most exhibiting?

Answer options: ✅ Loss Aversion

• Sunk Cost Fallacy
• Anchoring
• Self-Attribution Bias

Correct answer: Loss Aversion

Explanation: Emily is experiencing loss aversion, as she is unwilling to realize a loss by selling the underperforming fund, hoping it will recover to avoid the pain of confirming the loss. Her focus is on preventing further 'losses' or locking in past ones.