Saturday, January 23, 2016

Overcoming Behavioral Mistakes

SN: What tricks do you use to save yourself from behavioural biases? What are the most common behavioural mistakes you make?
HH: Most mistakes in investment stem from lack of knowledge. When one is walking in the dark, other senses become heightened. Similarly, when one is operating in the field of investments and one does not know what one is doing, the basic human survival instincts (being with the crowd – herd mentality, avoiding danger – loss aversion, etc.) kick in. These instincts sometimes may mislead one in stock markets which is a massive melting pot of human emotions.
Many advocate changing behavioural responses. I think if you try to do that you are up against thousands of years of evolutionary survival strategies. Instead, focusing energies on accumulating knowledge is a more reasonable task.