Madoff investors had so much fear of losing, that they lost it all?

[crgarcia]

Madoff investors had so much fear of losing, that they lost it all?

They choose a "never had losses" fund that really turned out to be "always losses"?

 

[flyingiguana]

ironic isn't it? i think it was more the fear of volatility...

 

[slacker]

'outcome bias',
from wikipedia:

One will often judge a past decision by its ultimate outcome instead of based on the quality of the decision at the time it was made, given what was known at that time. This is an error because no decision maker ever knows whether or not a calculated risk will turn out for the best. The actual outcome of the decision will often be determined by chance, with some risks working out and others not. Individuals whose judgments are influenced by outcome bias are seemingly holding decision makers responsible for events beyond their control.

They so wanted a risk free return of 12% as an outcome they would ignore facts that did not support this outcome.

There is also an 'diagnosis bias' at work here too probably. Once a decision to invest with Madoff was made they would ignore any facts that did not support that decision.

In short, 'Conviction hates evidence'.

Two books that cover the various 'decision traps' are 'Sway' and 'Predictable Irrationality'.

Good trading!