March Newsletter - 2019
- Mitraz Knowledge
- Mar 31 2019
FINANCIAL NEWSThe Securities and Exchange Board of India (SEBI) has issued norms for valuation of money market and debt securities that are rated below investment grade, a move aimed at ensuring uniformity and consistency in valuation across the mutual fund industry. The regulator said all money market and debt securities rated below investment grade, shall be valued at the price provided by valuation agencies. Besides, the residual maturity for amortisation-based valuation would be reduced from...
May Newsletter - 2018
- Mitraz Knowledge
- May 31 2018
KNOWLEDGE-OUTCOME BIASSymptoms - The tendency to judge a decision by its eventual desired outcome instead of judging it based on the quality of the decision at the time of making the decision. An example - Baron and Hershey in 19881 had presented a hypothetical case to subjects, to rate the quality of a surgeon's pre operation decision. The subjects were presented randomly with a good outcome (living) or bad outcome (dying). The result was that those who were presented with bad outcomes rated...
April Newsletter - 2018
- Mitraz Knowledge
- Apr 30 2018
KNOWLEDGE-MENTAL ACCOUNTINGSymptoms - People may normally feel that money saved for a new house requirement, kids marriage or education is too "sacred or important". As a result, this account may not be touched at all by the client even if doing so would provide added financial benefit. An example could be the portfolio that is managed for the client to meet the expenses for the kid's education in the US which is three years away. Simultaneously, the client also maintains a personal portfolio...
March Newsletter - 2018
- Mitraz Knowledge
- Mar 31 2018
KNOWLEDGE-SUNK COST FALLACYSymptoms - An investor who is likely to hold on to his investments or may invest more even if the opportunity cost is high because of the time and the money (cost) that has already been spent (sunk) on it. An example at an institutional level could be the PSU Banks which lend more money to distressed companies so that the initial funds could be recovered. Steps to correcting the bias - Future investment decisions should not be done on the basis of sunk cost. In...
Determining Your Risk Profile For Investments
- Anup Bansal
- Jul 27 2012
When the markets are going up and up, everyone goes on the bandwagon irrespective of adequate understanding of financial goals, risk appetite and investment objectives. However, when the markets turn around and head downward, the investors are in for a rude awakening. Even the most daring of the investors realize that their risk appetite is lower (and much lower in many cases) than what they perceived it to be.The process of investments-making should not be started without determining the risk appetite...
Competence and Wealth Advisory
- Anup Bansal
- Dec 31 2012
It is a given that competence is required to produce anything valuable, to service clients and in general, to be successful. However, the question that needs to be asked is, is competence demanded and valued by everyone in a profession. Having been trained as an engineer and technology professional, competence and continuous learning are traits that are taken for granted in the engineering and technology industry. Is this true in the Financial Services Industry where an insurance agent and a mutual...
June Newsletter - 2018
- Mitraz Knowledge
- Jun 30 2018
KNOWLEDGE-OUTCOME BIASSymptoms - The Isolation Effect (The Von Restorff Effect) is likely to be exhibited when people value a thing differently depending on whether it differs from the rest and whether placed next to an inferior alternative. Hedwig von Restorff recognized the Von Restorff effect in 1933. She conducted a set of memory experiments around separate and distinctive items, concluding that a different thing, in a list of otherwise related things, would be better remembered than an item...
February Newsletter - 2018
- Mitraz Knowledge
- Feb 28 2018
KNOWLEDGE-OVERCONFIDENCE BIASSymptoms - The self-belief that one has higher skills or an edge compared to others due to success in the recent past. A fallout of overconfidence bias is that we tend to remember winners and the effect of these winners on the portfolio. Overestimating the expected return and underestimating the volatility of the return in a shorter time-period, one tends to put more weight in whatever one feels more confident. An example could be: Holding a major part of ones' investments...
January Newsletter - 2018
- Mitraz Knowledge
- Jan 31 2018
KNOWLEDGE - CONFIRMATION BIASSymptoms - We don't argue any findings if it supports our existing view, whereas we tend to disagree more if the findings don't support our view.The entire chain of action follows: search, interpret, favor and recall, all in a way that confirms our pre-existing beliefs or hypothesis.An example could be: FD's are safe and better than Debt Funds. If this is our belief, then any short term negative performance by the debt funds in a client portfolio can make the client nervous...
June Newsletter - 2019
- Mitraz Knowledge
- Jun 30 2019
KNOWLEDGE - DISPOSITION EFFECT BIASSymptoms - This refers to a tendency to label investments as winners or losers on the basis of unrealised gains and loss.Effect - Investors tend to sell their winners too fast and hold on to their losers. Studies have shown that on an average, the winners have performed much better than the losers. The portfolio return suffers over the long term because of selling the winners in an attempt to protect short term return. Also, the investor loses the chance to balance...
