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Behavioural Investment Killers

What are the normal mistakes? Behavioral Investment experts have their reasons, the Media has its own reasons, and I have a combination of all of this!

1. Overconfidence: So many investors think it is easy to beat the index-it is not funny.

2. Amazingly stupid half investment lessons: ‘If you invest in a good company, it will always make money in the long run’. Orkay, Nirlon, Mafatlal, Silverline,…are all companies which were once upon a time in the index. Now they are not. This is called survivor bias. ‘My father made money in Infosys, so will I’ – replace it with ‘Nirlon’, ‘Orkay, ‘Patheja Forgings’ – and you will understand what I mean. History repeats itself, sure – we do not know how often, that is the problem.

3. I cannot see ahead, so I will look in the rear view mirror and drive: God bless the driver/investor – considering that we are driving around in a mountain.

4. Recency effect: ‘Market is going down’ – actually what they mean is ‘Market has gone down’ – now will it go up in the recent future? The true answer is I DO NOT KNOW. However retail investors will tell you ‘Market is going down…I think it will go to 15,000 on the Sensex…..what do you think Subra?’ If I keep quiet it gets reported as ‘Subra also kept silent…he must be in agreement’. Vow, actually I am not in agreement, I am wondering how people can make such statements, dude.

5. Herd Mentality: My brother in law just sold all his shares, and mutual funds and bought a flat….and the price has already gone up by 10%!! He tells me nothing will happen in equities for the next 3 years, SO I AM BUYING A FLAT. Oh! I forgot to add – he is a real estate broker.

6. Looking at the market everyday and getting confused. Listening to the experts and wondering who is an expert.

7. Running a 42km marathon like 420 races of 100 meters! 8. Fear – ‘My father lost Rs. 3 lakhs in Harshad Mehta scam’, ‘My brother lost Rs. 5 lakhs in Ketan Parekh scam’, ‘My uncle’s broker cheated him off Rs. 5 lakhs’…- all ‘fear indicators’ . Actually look hard enough.

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