In an interview with ETMarkets, Jain who has over 14 years of professional experience in wealth management said: “Trading requires discipline which is the most important thing. Looking at the short term and understanding the psychology of markets.” Edited excerpts:
How effective are Telegram or Facebook channels when it comes to so-called unbiased ‘tips’? SEBI has come down hard on such groups. But, why do investors instantly believe something on hearsay?
I would say rather than looking at the efficacy of Telegram channels etc., we should be more careful about understanding who are running these channels or providing content on the same.
If they are well registered RAs, and companies with a lot of credentials, then it can be helpful for people otherwise there is a lot of fake information, misguided information, etc. that can also happen.
So, knowing the credentials of subscribers is critical.
But this is not new from the investor’s point of view. People always act on the advice of someone whether it is your friend, family acquaintance, etc. for reconfirmation, but now since channels of taking advice is evolved so these have also evolved but behaviour is very similar.
Also, it is a herd mentality as well. Investing in equity requires effort but we just want to go the easy path which might not be very good, and then it again becomes like a confirmation bias.
How is behavioral finance different for traders and for long-term investors?
Approaching trading and investing is different according to me.
The skills required are a little different:
Trading requires discipline which is the most important thing. Looking at the short term and understanding the psychology of markets.
Investing requires perspective looking into the future, thinking long term, and studying the fundamentals well.
Trading is understanding the psychology of markets and investing is understanding the philosophy.
How can one overcome these biases and become more effective when it comes to investing and trading?
Investors can overcome these biases by following these simple steps:
• Be disciplined
• Be logical in your thinking
• Understand your financial position, your risk appetite
• Manage your emotions, and
• Take help from a financial advisor
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
Source-https://economictimes.indiatimes.com/markets/expert-view/mind-over-money-rahul-jain-of-edelweiss-wealth-decodes-traits-of-an-effective-trader-investor/articleshow/91701192.cms