Sunk cost fallacy
Sunk cost is a cost that has already been incurred in the past and can’t be recovered. For example: You booked tickets to watch a movie but you caught viral infection, still you went to the movie to justify the money you spent to purchase the tickets instead of taking rest. So, have you justified your […]
Behaviour Biases
At its core, behavioral finance attempts to understand biases in human behavior when it comes to personal finance. It combines social and psychological theory with financial theory as a means of understanding how price movements in the securities markets arises independent of any corporate actions (changes in the intrinsic value of the stock). One of […]
Don’t Leave Results To Beginner’s Luck
Beginner’s luck plays an important role in our day-to-day life. For example in cricket, we have seen many new cricketers giving top-class performance on their debut game only to fade into oblivion thereafter. Such experiences are also a part of the gambling world. Those who strike luck earlier play more and more till they lose […]
Availability bias causing decision bias.
It is a behavioral finance concept which describes how our environment can shape our perceptions.Let’s go back to 2008-09, wherein many people lost their jobs, economy was under stress and house prices were depreciating from their peak. Consider an example wherein, Mr Dumb who is unemployed due to slowdown in the economy. This person is less likely […]
Side effects of having an ownership bias while investing.
In 2010, Mr. Dumb bought a flat for his personal on Link Road, Bandra. He paid Rs 2.5 crores for that flat and expected the price to go up by 50% in 4 years. Now in 2014, there is a buyer who intends to purchase his flat for Rs 3 to Rs 3.25 crores but […]
Focus hard on investment process and not on its past “outcomes”
These days, Sensex is at new high and investors are still bullish on pharma and FMCG sectors. Just because in last 5 years these two sectors performed well does not mean they will continue to do well in future too.Such thinking is absurd. Most investors fall victim to this behaviour of analysing past outcomes while taking future investment decisions. […]
“Choices” are a boon or a bane
While we celebrate modern times with all its “choices”, think for a moment whether “choices” are a boon or a bane. While “choices” have given us variety, “choices” have also made our mind to go numb. It has been experimentally proven that too much of choice makes our mind exhausted. Think of the television channels […]
