Sep 8, 2011

Parag Parikh's video tutorial on Behavioral Finance

If you have one set of losers and one set of winner stocks, and you need money then rather than selling the winners you may choose to sell half half of both. In this way you are managing your finances as well as avoiding behavioural anomalies.
One should not have more than 20 stocks in a portfolios because it reduces return and it is difficult/impossible to track these many 20-50 stocks.

Loss aversion wil be very low if your allocation is across asset class.
Equity stocks are best form of assets and best hedge against inflation.
Regarding gold- People now think that it is right form of investment only because the prices are rising. Behind this type of thinking your casino mindset is working
The innovations of financial markets like derivatives are always against the end user.
Write down rational behind each investment.
If you bought 1000 share of xyz at 50, and if the stock price comes to 30 and you do not think more can be bought at this level then you should sell your all holding of xyz.
Over time profits become boring and losses become terrifying.
If the profits/gains are gradual, it gives more happiness.
Keep less attention to your investment. Don’t go on looking your investments every day, why the stock went up or down.
Receiving stock alerts is only a way of destroying your mental peace.
Life is too simple but we make it complicated by technology and gadgets.
Check your inv once in a month. Just to check.
Mainly brokers make more money than traders.
Don’t sell your stock because it has doubled or you are making huge money. Sell it if you think it is overvalued and sell it if the answer to your question that will you buy it at this price is no.
Infrastructure companies mainly keep asking money from investors rather than throwing money at investors.
Deciding not to decide is also a decision.
Each one of us have to know our appetite for loss.
Company visits, analyst meets part of endowment effect. So do not determine investment decision based on that type of experience.
If the stock price goes down after you purchase it does mean that you are wrong.

Disclaimer: We are in no way related with ppfsltd.


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