Outsmarting Your Own Brain

You cannot erase the endowment effect, but you can design around it:

• The stranger test: Ask, "If I didn't already own this, would I buy it today at its current price?" If no, that is the bias talking
• Pre-commit to exit rules: Before you buy, write down the conditions under which you will sell. Follow the rules, not your feelings
• Reframe selling as gaining: Instead of "I'm losing my stock," think "I'm gaining cash to invest in something better"
• Annual audit: Once a year, review every holding as if you were starting from scratch

The endowment effect quietly drags on returns. Simply knowing about it is the first step to beating it.