Loss Aversion and Brazilian Soccer
Why are Brazilians so Pessimistic about the 5-time Champions Chances to Win the
2026 World Cup and how does it Correlate to Wealth Managment?
By: Philip O'Toole
“An April survey carried out by Brazilian polling institute Datafolha found that only 29% of the population believes (Brazil) can win the 2026 World Cup, the lowest figure since it began polling in 1994.”
- CNN.com, June 15, 2026
1. Marrying Into Brazilian Soccer Madness
Soccer, as it’s known in the United States, was always way down my list of favorite sports. Other than a brief period when the Force Professional Indoor Soccer Team caught the attention of many Clevelanders in the 1980’s, I did not spend much time following the sport. As a result, I don’t remember much from first time the USA hosted The World Cup in 1994. I barely recall that Brazil won that World Cup, becoming the all-time leader in World Cup titles with four at the time.
Then in 1999, I met my wife, a Brazilian studying in the United States. My first introduction to Brazilian Soccer madness was in 2002 while we were living in Chicago and watching our first World Cup together broadcast from the host countries Japan and South Korea. I didn’t know any Brazilian players beforehand, but I quickly became familiar with one-name stars like Ronaldo, Rivaldo, Ronaldinho and Cafu, along with a couple that went by their full-names including Roberto Carlos and Gilberto Silva.
My wife watched every game with an intensity that would make any Cleveland Browns or Pittsburgh Steelers fan blush. By the end of the Quarter-finals stage, a 2-1 Brazil victory over England, I was hooked. It wasn’t just about the results. Brazilian soccer is known globally as “the beautiful game” for a reason. In Brazil, they call it “jogo bonito”. It is a style of play that combines individual creativity, joy and fluid tactics that you must see at its apex (like 2002) to truly appreciate.
Brazil went undefeated in the 2002 World Cup, a perfect 7-0, securing their fifth title with a 2-0 victory over Germany. It would place them two titles ahead of any other country at the time (Germany and Italy have since closed the gap to one with four titles each). In 2026, the Brazilian National Soccer team remains the most accomplished team in World Cup history. So why according to a National Poll do only 29% of Brazilians believe their beloved “Selecao” (The Selection) can win the World Cup in 2026?
Behavioral Finance teaches that “Loss Aversion” and “Recency Bias” are common drivers of emotions and can ultimately drive decision-making in people when it comes to their money. But these biases don’t just apply to money. You see them in every walk of life, including sports. Could these two biases, separately or in tandem, be driving the opinions of Brazilians about their National Soccer Team right now?
2. Could Loss Aversion Be Driving an Entire Country’s Outlook?
Before we try to answer the above question, let’s first look at a brief history of Brazil at The World Cup.
• Brazil has won more World Cup titles than any other country with five (1958, 1962, 1970, 1994, 2002).
•Brazil is currently in a 24-year World Cup title drought (2002).
•Brazil also experienced a 24-year drought from 1970 to 1994.
•Brazil’s previous 24-year drought ended in 1994, the last time the USA served as host of the tournament.
•On July 19th, The 2026 World Cup Final will be held on US soil for the first time since 1994.
Could the universe be trying to tell us something?
The textbook definition of loss aversion is “the tendency to experience pain of a loss far more intensely that the pleasure of an equivalent gain”. In Daniel Kahneman’s book “Thinking Fast and Slow”, he states that the emotional impact of losing something we already possess is substantially stronger than the satisfaction of gaining something of equal value. When it comes to sports, you might say that loss aversion causes us to dwell more on the losses, especially the near misses, of our favorite teams didn’t than to appreciate the games they did win. As a lifelong Cleveland Indians/Guardians fan, I can still recall with great clarity the The World Series
losses in 1995, 1997 and 2016. Those losses certainly will certainly frame my outlook for current and future Guardians teams no matter how hard I try to resist.
And As far as I can tell in speaking with my wife’s family in Brazil, they are more haunted by the losses during the last five World Cups between 2006-2022 than they are with the titles from 1958-2002. Which brings an additional bias into the equation, Recency Bias. Recency Bias is “the tendency to allow more recent events to overshadow a much larger body of historical evidence”. Another prominent author in the area of Behavioral Finance, Richard Thaler summarizes recency bias as our brains being wired to believe what has happened most recently is likely to keep happening. Brazil has only made one semifinal appearance since 2002 and has been bounced in the Quarterfinal Round four times by the likes of France (2006), Netherlands (2010), Belgium (2018) and Croatia (2022). Their only semifinal appearance was the embarrassing 7-1 loss to Germany in 2014, on Brazilian soil no less. Five crippling losses in a row over the past 20 years is certainly overshadowing the five titles earned prior to 2006.
Moreover, The World Cup qualifier matches in 2025 and 2026 has only reinforced what Brazilians already seem to believe, that their team has no shot to win a sixth title in 2026. Never mind that their 6 losses in qualifiers leading up to the 2026 World Cup is the exact same number of losses they experienced in qualifiers leading up to the 2002 World Cup, which again, they won with a 7-0 record. But when you understand the power Recency Bias and Loss Aversion on the human psyche, then you can understand why over 70% of Brazilians believe their team cannot win in 2026.
So how does Loss Aversion and Recency Bias drive behavior of investors…
3. In Wealth Management, Loss Aversion Can Hurt You
While it is disappointing that most Brazilians are non-believers in this year’s World Cup team, it is important to point out that acting on your inherent biases toward your favorite sports team has little impact on the rest of your life. You are probably no fun at watch parties, but otherwise, those biases cannot hurt you. In Wealth Management, however, acting on Loss Aversion and Recency Bias, can lead to results that can be difficult to recover.
The most obvious example is when investors panic out of being long-term equity investors during periods of downside volatility, as opposed to staying the course, or even increasing your investments into equities as their prices get cheaper.. Most everybody is familiar with the expression “buy low and sell high”. Many are also aware that most of the time in US history, equities deliver positive returns, but occasionally are interrupted by bear markets, defined as corrections of 20% or more. Yet for most, human instinct is not to buy or hold when equities are declining, but their instinct is to want to sell. This is Loss Aversion.
A less obvious example is when retirees have a hard time spending their hard-earned wealth once they pivot to the distribution phase of life. They spent 40+ years accumulating millions, yet find it difficult to get outside their comfort zone and spend money in retirement. They worry more about outliving their money than they do enjoying the moment. And any bad economic or market news only reinforces those fears.
Another common example of loss aversion in Wealth Management is a corporate executive who has 50% of his/her investable assets in company stock. Because the stock has pulled back to $100 from its all-time high price, they do not want to sell and diversify their position, because if they do, they are recognizing a real loss. They may say something like “I’ll wait until the stock gets back to $150/share and then I will diversify”. It is important to recognize that this type of decision is not intellectual, it is emotional.
My hope for my clients is that they understand how biases drive emotions and oftentimes get in the way of sound decision-making. Furthermore, my hope for the Brazilian fanbase is that despite the recent history of losses in The World Cup, they recognize that this team has as good a chance as any to take home the title on July 19th in The Meadowlands. In fact, after the comeback win against Japan in the Round of 32, I am even more convinced that Brazil will bring home their 6th title in a few weeks. And if not, I promise not to be a downer and the watch parties.