Hope is a risky strategy – Somnath Banerjee
Today, I am going to talk about behavioural finance and its impact on investing. There are various style/strategies of investing i.e. fundamental, technical, momentum, value etc. Various investors deploy these strategies in isolation or in a mix. One must find what works and then stick to it. Whatever style or strategy one uses, investing is all about controlling emotions i.e. greed, fear and hope. There may be more (anger and ego come to my mind) but that’s secondary or at least should be kept on the top shelf where it’s difficult to reach while investing. Lot of commentators say emotions are best kept away from investing, but my humble opinion is, it’s impossible. We are creatures of habits and emotions. It’s unnatural to not feel emotion in something as important as investing unless one is just doing it only for fun without any reasonable stakes involved. So, the best we can do is to control these emotions and I would argue having controlled/measured emotions may even help in investing (at least it does to me). Get the balance of emotions right and you will be like Ernest Hemingway’s Old Man and the Sea when it comes to measuring your performance. Get the balance even...