Cognitively Yours

    Raja R,  Author "To buy when others are despondently selling and sell when others are greedy, buying requires the greatest fortitude and pays the greatest reward"  - Sir John Templeton In the previous blogs, we discussed how mental shortcuts though needed to take quick decisions as well as fear of regret may also lead to biases which result in sub-optimal investment decisions. We had also discussed how impatience and need for instant gratification make us hardwired to short-term results. We also saw how we react to events and announcements on a stand-alone basis. In the last blog, we had seen how our predictions cannot be right all the time and we should accept error in order to reduce error and we can never be error-free in our predictions. In this issue, we will begin with an interesting story instead of the statistical text book problems and relate it to our behaviour in investing. “The Bottle Imp” is an 1891 short story by the Scottish author Robert Loui...

  Raja R,  Author "Market timing is easier said than done and more difficult to repeat again and again" In the previous blogs, we discussed how mental shortcuts though needed to take quick decisions may also lead to biases which result in sub-optimal investment decisions. We had also seen how fear of regret affects our decision to invest and makes us focus only on risk and not on returns. We had also discussed how impatience and need for instant gratification make us hardwired to short-term  results . How the bias for action leads to not allowing investment to settle and yield rewards. In the world of investing, being correct and something isn’t at all synonymous with being proved correct right away. In the last one, we had seen how we over- react or under react to new announcements or events without incorporating the same in the information already available and not take a holistic view. We have seen the equity markets being highly volatile last year. S&P BSE Sensex ...

  Raja R,  Author "In the world of investing, being correct and something isn’t at all synonymous with being proved correct right away" In the previous blogs, we discussed on how mental shortcuts lead to biases which result in sub-optimal investment decisions. We had also seen how fear of regret affects our decision to invest. We had also discussed, how impatience and need for instant gratification make us hardwired to short-term results. How the bias for action leads to not allowing investment to settle and yield rewards. In the world of investing, being correct and something isn’t at all synonymous with being proved correct right away. We invest and we track our investments. There are times when our investments do well and there are times when it does not do that well. When we track our investments, how do we react to the news or announcements or events affecting our investments. Do we respond too conservatively or react aggressively to the new information? Or we are able t...

  Raja R, Author “Investing is a continuous process too; it isn't supposed to be interesting" In the previous blogs, we discussed how mental shortcuts lead to biases which result in sub-optimal investment decisions. We had also seen how fear of regret affects our decision to invest. In the previous blogs, we also discussed how impatience and need for instant gratification make us hardwired to short term. We somehow overcome these biases and invest. We track our investments. Do we allow them to settle and then review the rewards? Most of us do not give time for investments to flower. “Investing is a continuous process too; it isn't supposed to be interesting. ...Benign neglect is the secret to long-term investing success. If you change your investment policy, you are likely to be wrong; if you change it with a sense of urgency, you're guaranteed to be wrong”. We do like to see quick results, we also love to be doing something, as opposed ...