Placebo effect
Improvement that comes from believing you're being treated, not from the treatment itself. Real, but mostly small, and mostly in things people report themselves, such as pain.
In plain English
A placebo is a dummy treatment: a sugar pill, a fake injection. Fair trials compare the real treatment with an identical dummy so that belief affects both groups equally. But when a placebo group improves, belief is only one reason. People also recover naturally, and they tend to start treatment on their worst days, so they would often improve anyway. Separating the true placebo effect needs a third group that gets nothing.
Uncle Gary explains
Uncle Gary's $89 insoles and Aunt Linda's $9 ones both cured their sore feet. When Mia secretly swapped them, Gary reported a noticeable improvement in the zones.
Why it matters for your money
Expensive things feel like they work better, in medicine and in money. A fund with high fees can feel more serious than a cheap index fund; only results measured after costs can tell you which one actually did better.
Where we tested it
Related terms
All glossary terms. Educational content, not financial advice.