We are Emotional Fools
1) The Brain fools us all the time
2) Let’s say you buy a stock for Rs 1000
3) Let’s say next day it becomes Rs 800
4) Although it is a great idea to buy another unit of the stock but the loss of Rs 200 disappoints you into not buying more. The Pain of Loss Clouds logical thinking. The mood is just not right ; so what it it is illogical
5) Then one day it crosses Rs 1000 and becomes Rs 1200, a gain of Rs 200
6) This elevates your spirits because it makes you justify your previous buying decision and even though we do not check the Rate of Return, just the fact that it is more than purchase price sets the tone to take the next decision
7) In all likelihood you will land up buying another unit of the stock although at Rs 800 you may have allowed it to pass
8) The heart permits this decision even through the brain realises that you have been an emotional fool
9) In investing we are all emotional fools and pay such prices all the time
10) Therefore SIP works best because it removes the head and heart out of the investing process
11) The one time decision of whether to start an SIP or not becomes the only hurdle to cross and paves the way for multiple subsequent investment decisions which are set on Auto Mode
12) When markets crash next time have enough money in debt funds
13) Because needless to say Debt Funds wouldn’t have created disappointment atleast in the any investment period.
14) Having money in positively moving Debt Funds that will set the mood to switch and make the most of opportunities that show up during a correction
15) There’s nothing better than preventing draw downs (temporary loss) in investing
16) Having Positive or Healthy money handy is the best position to be in to take complete advantage of market opportunities
17) Else the opportunity may show up but your mood will cloud your thinking allowing the opportunity to simply pass by
18) One would have lost more money in letting opportunities pass by than making money otherwise
