What is the primary bias associated with passive preservers?

The primary bias associated with passive preservers is emotional. Passive preservers tend to hold onto their investments for an extended period, often due to an emotional attachment to their existing holdings. This bias can lead to infrequent evaluations of their investment performance or the decision to sell when necessary. They may resist selling losing investments because of fear or regret, which gets amplified by their emotional connections to their choices.

Investors often experience discomfort when they consider realizing losses, leading to a reluctance to sell underperforming assets. Emotional biases can also manifest in overconfidence or a desire to avoid the pain of accepting a loss, causing passive preservers to maintain positions that may not otherwise align with their investment strategy or market conditions.

Understanding the emotional underpinnings of investment decisions helps identify why some investors may fail to act in their best financial interest, highlighting the importance of emotional intelligence in investment management.