Role of emotion in Investing

Managing emotions & investing success

Once right asset allocation has been defined and implemented, the investing success largely hinges on managing emotions during different stages of the market. Market volatility is quite common (I will share some interesting facts in a separate post) & its effect on individual portfolio is linked with the respective asset allocation strategy. Simply put, a portfolio with high allocation to equity is capable of generating high return but exhibits commensurate volatility. As opposed to this a debt heavy or a conservative hybrid portfolio will show stability but return possibilities will be lower than equity.

Good time conversations

During sustained up move of the market, discussions often range from the percentage return of a particular scheme or portfolio to possible levels (Prediction) if Sensex/Nifty. The general tendency to increase equity allocation is high. FOMO (Fear of missing out) is at play and perception of risk in market up move is quite low.

And the volatile time conversation

The discussion shifts again towards predicting lower range of the market, different threats / factors that can increase the volatility. The comparison begins with other traditional offerings or even the opportunity cost.

The winning approach

Despite equal opportunities, all participants in a classroom or in an organization will never have similar outcomes. In the same market which has generated good risk adjusted returns to disciplined investors, there are numerous examples of traders speculating and incurring
The key to successful investing outcome lies in choosing appropriate time horizon of investment , avoiding speculation on either side, ample arrangement of liquidity for near term requirements and high conviction to name a few.
We remain committed in our resolve to help our investors in navigating through volatility for a satisfying investing experience.

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