Do You Make Investments Based On Emotions?
By SiliconIndia
"The important thing to remember here is that in the long run, the outcomes of the two portfolios, in all likelihood, will be very different. It is highly possible that, while the portfolio with less volatility will give returns which will be good, the second one may give some spectacular returns," says Prem Khatri.
This behavioral pattern is also common for those investing in stocks. At times of market upheaval, people who are unable to withstand risk often sell their stocks while the one with positive temperament wait for the storm to subside and hence reap greater benefits.
Smart investors never follow the herd mentality in which people buy and sell stocks or other financial products depending on what others are doing. Warren Buffet once said that he always sold when others bought and he bought when others sold.
A common practice for sellers of investment products is that they sell products that are in trend rather than the one that will suit the investor. "Manufacturers and distributors of (investment) product are giving what the clients want but not what they need," says Mukund Seshadri, founder, MSVentures Financial Planners.
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