Don't Be Your Own Enemy

Three key behavioural traps that investors need to guard against in the current scenario

- Aniruddha Bose

Today, A conflux of global and local factors has resulted in a situation where Indian investors are particularly susceptible to falling prey to their own behavioural pitfalls. After a rip-roaring 2017, equity markets have entered an extended time-correction mode ahead of the 2019 general elections. The all-important earnings growth rate, though showing promise, is yet to find its sea legs. Debt mutual funds, hailed as the FD investor’s saviour not long ago, have mostly disappointed over the last year and a half. The purported real estate ‘turnaround’ story remains subject to speculation, as the sector appears to be putting together only a lacklustre recovery at best. An enigmatic motley crew of cryptocurrencies zoomed ahead in 2017 leading to a hectic proliferation of Bitcoin wallets, only to crash more than 60 percent from their year end highs. Aiming to keep your head above water amidst this bedlam? Here are the top three behavioural investing traps that you need to insulate yourself from right now.

The siren song of stories

Of all the behavioural traps that investors succumb to, few stand out like the innate tendency to fall prey to stories. The seductive allurement of stories, it would appear, is hardcoded into our DNA. In the investing world, the power of stories can prove especially dangerous, and can even serve to trigger a host of other dormant behavioural biases. Basically, stories regularly influence investment decisions; and usually not in a good way.