In our profession of guiding people to do the right investments, we experience and deal with the different emotions of our clients. In my professional life I have gone through many ups and downs. I had to deal with my emotions and clients emotions during different phases of the investment cycle. So, I thought of writing this blog for my team, on the relationship between emotions, decisions, and truth
A human can experience around 34,000 different types of emotions in his or her lifetime. An average human makes 35,000 choices per day or in simple words 35,000 decisions per day. (Source: www.psychologytoday.com). 99% of our decisions are based on emotions or feelings and not based on facts or truth, in other words real need.
Joy, fear, love, acceptance, anger, greed, are all different forms of emotions we experience in our life.
Do you know that the oldest and strongest of all emotions of mankind is fear? The oldest and strongest kind of fear is the fear of the unknown. We saw that during the period of March 2020 and April 2020 when the world experienced the lockdown for the first time. Markets corrected more than 40% just in a span of three weeks which had never happened before that. In next six months the market went up by 50% percent. Imagine the roller coaster ride so many investors went through this phase
To be happy and have a meaningful life the lesser decisions we take the better the odds of us becoming happy and successful. We do not need all the things which we consume every day or buy every day.
Do you also know that truth has nothing to do with emotions? Truth is a fact with no emotion or feelings.
Feelings give us information, and they can move us to action, but no matter how powerful they are, they are no facts. I will share an example here with you all, why it is important for all of us to understand the difference between emotions and truth. In the stock market, the price of a share moves daily based on the feelings experienced by different people in the world, but eventually the markets slowly find out what the truth is, and the share price settles down based on the truth. A true advisor or analyst can see this and guide the clients away from emotional decision-making.
Also, when we make mistakes and the fear of getting exposed makes us angry and we attack the person who is trying to tell us the truth. That’s why wars, legal fights, divorces and break down in relationships happen. So, to grow in life and career understand how we handle emotions is very important and critical.
One of the biggest weakness of humans is that they try to use emotions to prove what is right and what is wrong? Two people can experience different emotions on the same fact at the same time and one of them will interpret that fact as truth and the other person can interpret the same fact as false or wrong. That’s leads to drama.
When we say the person is mature what indirectly we are saying is that he or she is less emotional and has control over most of his feelings. When you have control over your feelings or emotions than you can think through clearly and make wise decisions in life.
Most of the businesses use fear and greed to sell products to you knowing that you are vulnerable to emotions. Very few businesses share information as a tool to sell their service or product.
This new investment product will result in an increase in the stock price of those companies that are part of the ETF and also result in a cascading increase in stock prices of those companies in similar domain of similar size. Here, it is also important to note that there would be a negative impact on stock prices and the NAV’s of Indian mutual funds investing in these companies when the markets turn bearish or when there is a withdrawal from such ETFs. Here, at Simplicity, we will be closely monitoring the investment patterns of such products and their impact on our client investments. We will also ensure that our clients are invested in Mutual Funds that will not be impacted by such global products so that your overall portfolio continuous to return handsome profits.
While Globalization is good for India in the long run, it is important to understand that it will also impact investment returns. We, at Simplicity, will be laser focused on such impacts and ways to mitigate their risks.
In nutshell, emotions in majority of the cases do not let us take rational decisions. Truth is bitter but it does not harm much. So next time you take a investment decision remember this, stay away from people who do a sweet talk to sell any investment product to you. In money matters a hard talk is always better and delivers the return in the long run.
