Money Matters – More of Emotions and Less of Numbers

Nikita Vete

Did it ever cross your mind that our simple behavioral instincts can trigger our investments decisions than any other factors out there? Surprisingly, it is true. Let me walk you through this thought. How many times has it happened that you felt that the market was going to crash, and you have withdrawn your investments, and the market did not crash? Or felt that the market has given corrections and you have booked the profit, but the market further corrected to give better results? Have you observed that a procrastinator always files taxes in the last week? Or someone who is confused by nature fails to make important financial decisions at the right time? Have you ever observed those parents who have spent their childhood in a financial crunch merely with a desire to provide an extraordinary life for their children? Or even in cases where one has seen the downside of having financial loans in family, prefer staying miles apart from debt. Those who lost their money in stock market scams become anti equity investments. Boiling down, the simple decisions like how much should one save and spend from their paycheck is reflected by one’s behaviour.

The movie ‘Ta Ra Rum Pum’ although was not a box office hit but gave the most important learnings of Financial behaviour. The Protagonist played by Saif Ali Khan has been shown under the light of a young charismatic race car driver. He earned a lot of money by winning races but used to splurge it all right away. His character arc is of a very carefree person who emphasizes on staying in the present and making the most of it. Later he is faced with an accident and the source of income suddenly stops. He never believed in the idea of savings because of which his family has absolutely no savings or investments to bank on and are forced to cut down their standard of living. Though a very fictional illustration about behavioral impact and finance but in the real world every bit of it stands true.

Human mind is indeed very complex and we as individuals  make absolutely biased calls. We are by nature very lazy and prefer our comfort zone which is why many prefer a gym trainer. Similarly, in the world of investments one needs a “financial coach”. A financial coach gives an unbiased opinion, keeps the investor on toes and prevents one from taking bad financial decisions. He designs the portfolio giving proper justice to the needs and dreams of the investor. Investments are by nature a very personalized thing and thus, many prefer to confide it to a close one or a trustworthy person. Thus, if your advisors know more about you than yourself, then my friend your investments are in the right hands!

Another pro tip which I would like to give you all is focus on linking each of investments to a goal or a dream. Make sure that this dream is very personalized in nature and you are very much connected to it. In this way, your chance of breaking this investment reduces. Thus, you will enjoy the compounding benefit and inculcate good investment habits. While doing this, don’t forget the golden mantra of asset allocation- it will do systematic risk dispersion. Also, if your portfolio is inclined to a particular asset class then it is an alarming sign.

Lastly, the more you will understand,that investments and money matters have to do a lot with your personality the better you will be able to treat it. Just like one experiences a difference when trained by a trainer versus self-training, the same is felt when your financial decisions are taken with the help of an expert. Don’t let your emotions drive you away from your goal.

Nikita Vete is the Executive Assistant at Vete Associates Investment and Services Pvt. Ltd.

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