Investing with House Money  ArticlesM Investing with House Money  ArticlesM Investing with House Money  ArticlesM

Investing with house money

Mind Over Money in practise
Peter Siks

Summary:  When investing there are a number of behavioral finance concepts to be aware of. The house money effect is one, which focuses on the importance of considering how to enter the market with larger sums of money.

Beginning to invest is a big step for everyone, and for many it's something they have considered for a long time. While monthly investment opportunities are becoming increasingly popular, many also decide to start their investment journey only once they have a larger sum of money. 

This sum can be something you have saved up for, or it can be something that you’ve received a little easier or more surprisingly. For instance, a larger bonus than expected, a homerun stock investment or the like. If your lump sum of money has come easier to you than you expected, you should be aware of the house money effect.

House money

House money is a behavioral finance concept where investors risk more with money that was easily obtained. The effect can be compared to winnings from a casino. Let’s say you enter a casino with USD $500. 

After an hour you are up to $1,200, meaning that your profit stands at $700. While you still want to keep the $500, as the night goes on you could end up playing a bit more loosely and risky with your profits, in order to see if you can bring home the “big win”. This behavior is similar to the house money effect, because you feel like you’ve gotten your money pretty easily so you are more willing to put it at risk.

Evening out your odds

When you invest your money there are ways and strategies to improve your chances of long-term success, and that could help you avoid falling into the house money trap. 

Consider the Jones family. Unexpectedly, they receive an inheritance of $50,000. The Jones family's day-to-day finances are healthy. They have $60,000 in savings, the mortgage payments are ahead of schedule, and substantial savings can also be made every month. The inheritance is therefore not necessary to cover the running costs of the family. It can be seen as an unexpected, substantial financial windfall. 

After a number of conversations, the Jones family decides to invest the windfall. The purpose of the investment is extra financial leeway over 20 years so they can enjoy their eventual retirement. The investment time horizon is long.

How to start

Mrs. Jones has been reading a lot about how to start investing. To her it is clear that she does not want a wild adventure. She understands that diversification is a good way to limit risks. She follows her broker’s advice and chooses a globally diversified portfolio. Now she knows what she wants to invest in, the next thing to figure out is exactly how much of the money she should to invest to get started. 

The immediate response for many, including Mrs. Jones, would probably be to invest it all at once, as a lump sum, but that might not be the best approach in this specific situation. The reason for that is that if the Jones’ invest everything immediately, their portfolio will become very sensitive to market movements, relative to that one day when they invested. 

What they could do instead is spread their investment out over e.g. 10 months and invest $5,000 per month. Doing this will make it less important to time the market, as some of it could be invested when markets are down and some when it is up, averaging out the price for the entire investment.

The take away?

If you unexpectedly receive a financial windfall, don’t rush into the market. Take some time to figure out what the right approach is for you and your money. It is human nature to take more risks with unexpected money, whether you are an experienced investor or not. So remember that investing is not a “game” of all or nothing. It is wise to take enough time to build up a diversified portfolio, without trying to time the markets -- perhaps especially when starting with house money. 

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • 350x200 peter

    Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • 350x200 althea

    Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • 350x200 peter

    Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • 350x200 charu (1)

    FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • 350x200 ole

    Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.