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...
Financial Adviser - Do You Have A Professional?
- Anup Bansal
- Aug 18 2014
When it is a question about your health, would you not ensure that the doctor you are consulting is qualified? When you want to build a nice house, would you not ensure that the architect you are consulting is qualified? When you want to get your car fixed, would you not ensure that the mechanic you are consulting is qualified? Is this the same for your financial advice?Too many times I hear from people around me about getting their advice from newspapers, TV channels and in general tips from friends...
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...
The X-Factor
- Anup Bansal
- Sep 15 2018
"It is all about timing!" The protagonist Chesley Sullenberger says in the movie 'Sully'.Captain Sullenberger (known as Sully) landed the US Airways flight 1549 on river Hudson in New York when the plane got hit by birds after taking off from La Guardia airport on January 15, 2009. The survival of all 155 people on-board was nothing short of a miracle as "people do not survive water-landing". Sully was hailed as a hero before the National Transport Safety Board (NTSB) initiated an investigation and...
Be the BULL in this market, Invest More!
- Anup Bansal
- Oct 21 2018
The securities arm of a well-known bank that serves both Institutional and Retail clients gave SELL rating on Hero Motorcorp for Institutional clients and ACCUMULATE rating for Retail clients on the same day. I guess they wanted to keep making the market on this stock and ensure there were enough buyers for the institutional sellers. I am a patient investor, but such practices make me so impatient (and aggravated)!We all are getting numb with the market volatility in the last one year with almost...
August Newsletter - 2018
- Mitraz Knowledge
- Aug 31 2018
KNOWLEDGE - INFORMATION BIASSymptoms - The tendency to collect more information beyond a point that the information collected ceases to affect the decision that has already been made. Financial News Channels and Websites present investors with plenty of information every day and it is difficult to filter the material, relevant info from non-material info.Examples - Getting worried or influenced by daily share price or market movements or random company developments that usually contain no information...
July Newsletter - 2018
- Mitraz Knowledge
- Jul 31 2018
KNOWLEDGE-LOSS AVERSION BIASSymptoms - Loss aversion refers to the tendency to prefer avoiding losses than acquiring gains. Some studies suggest that losses are psychologically twice as powerful as gains. This term was framed by famed psychologists Amos Tversky and Daniel Kahneman in the early 90s.Examples - A). Loss aversion has a very significant effect on Real Estate Investments, an asset class which is influenced by emotions more than any other asset classes. People are unwilling to sell their...
