Thought for markets

Why is it that people have no problem buying more apples and oranges when they are cheap (and less when they go up in price) but do the exact opposite when it comes to far more significant purchases such as houses and financial assets?

Thanks/BD

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2 Responses

  1. good thought….

    maybe reason is more related to mindset – incase of apples and oranges the satisfaction / gratitude derived out of buying at lower or higher price is immediate with the end goal of consuming (unless you are trading) …

    unlike in FA or RE where you may have to wait out (at times significantly longer) to derive the satisfaction and the ultimate goal is appreciation thereby running risk of witnessing notional loss…. which to my knowledge is not filling appetite for most (and as is actually the case – they would happily continue to only consume apples and oranges)

  2. I guess Mental Accounting at play… Apples and oranges fall into the expense bucket and therefore provide maximum satisfaction when consumed at a lesser price. Home as well as financial assets categorized as investments and therefore chasing them at higher prices lest they go still higher and diminish satisfaction (utility) derived from the purchase…

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