Investing Behaviour

The spread of business channels and other financial media has had grave consequences for investors over the past few years.

One of them is the need to justify each and every move of the market.

The other is the tendency to buy or sell stocks first and think about the rationale of buying/selling later.

The third, and the worst, consequence for investors of watching business channels and reading financial media has been the nonsensical focus on the movement of the Sensex or the Nifty.
[Read more…] about The Stock Market Nonsense Called ‘Consensus’

After last week’s crash landing, this week wasn’t any better for stock markets around the world.

The Indian markets, represented by the BSE-Sensex, closed the week down by 466 points, or 2.7%. This took the Sensex to sub-17,000 levels for the first time since June 2010.

Source: Yahoo FinanceAs we stand now, nobody knows anything.

Is this market going up or down? [Read more…] about Is This Market Going Up or Down?

When in doubt, follow. This is an apt quote on the behaviour of us humans.

We generally draw comfort in going with the majority, or the consensus.

The problem is that we have very less control on such behaviour, as evolution has equipped us with this tendency of running a rat race.

Yes, you read that right. We are all running several rat races, whether in our work lives or when it comes to investing our money.
[Read more…] about The Problem With a Rat Race is That Even If You Win…

Here is a snapshot of the home page of today’s Economic Times.

It’s good that the newspaper is updating people – minute by minute – on the latest on the global crisis. But it is images/pages like these that add to people’s panic.
[Read more…] about This is How Media Adds Fuel to Panic

Many investment experts and financial websites make outrageous promises of untold riches to their readers and clients.

‘Become the next Warren Buffett’, some would promise. And then there are others who would suggest – ‘How you can get rich like Warren Buffett‘.

If you have also come across such promises or claims, and have started to believe that you or your kid can really become the next Warren Buffett, see this..

[Read more…] about So You Want to Be the Next Warren Buffett?

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The brain we have on the top of our head isn’t a flawless machine.

It is definitely powerful and comes in an easy to carry container. But it has its weaknesses.

In everyday terms, we call such weaknesses as ‘biases’. The good part is that while we cannot exchange our brains with other people nor can we upgrade it at a hardware shop, we can avoid mistakes that our biases cause by just taking notice of them.
[Read more…] about Your Brain on Stocks

“It’s impossible to predict the future, but humans can’t help themselves. From the economy to the presidency to the Super Bowl, educated and intelligent people promise insight and repeatedly fail by wide margins. These mistakes and misses go unpunished, both publicly and in our brain, which has become trained to ignore the record of those who make them. In this hour of Freakonomics Radio, we’ll dream of the day when bad predictors pay.”

Listen to the radio here: [audio:https://www.podtrac.com/pts/redirect.mp3/audio.wnyc.org/freakonomics_specials/freakonomics_specials060411.mp3]

“Just as nature abhors a vacuum, people hate randomness. The human compulsion to make predictions about the unpredictable originates in the dopamine centers of the reflexive brain. I call this human tendency ‘the predication addition’.”

This is how Jason Zweig describes the human tendency to predict in his book Your Money and Your Brain.

So do you suffer from prediction addiction?
[Read more…] about Do You Suffer from Prediction Addiction?