how to avoid the endowment effect
an investor must be mindful in order to avoid the endowment effect they must take deliberate action or take care to understand the assets they hold and the emotional ties they have to the goods first investors must have a clear investment strategy having a clear investment strategy can help investors make objective decisions about when to buy and sell investments by having a plan in place investors can avoid getting emotionally attached to individual investments to make objective decisions it s important to have clear criteria for when to buy and sell investments this could include setting a target price a time horizon or specific performance metrics because it may be harder to sell the winners investors must have a specific plan in place and not get caught up in prior performance though an investor can always change the criteria it uses to buy and sell investors are more susceptible to endowment risk should they not have a clear goal investors should also continually review and rebalance their portfolio by continually reviewing the investments within a portfolio investors can more closely understand how the investment moves and strive to not be as emotionally attached this also works to emphasize portfolio diversification if an investor analyzes an investment as part of a larger portfolio the investor can understand why an investment is being held and why it may be good time to sell 