Investor psychology aspects of investor psychology for financial advisors

2,760 views
2,710 views

Published on

Published in: Technology, Business
1 Comment
8 Likes
Statistics
Notes
  • Gokul Kripa colonizers and developers Pvt. Ltd.

    Real estate in Jaipur makes an enormous contribution to development of the economy and national growth. Real estate has forward and backward linkages with over one hundred and sixty five industries and is the largest employment generator, perhaps only after agriculture. However, despite the significance of this industry, it has always remained a very disorganized one. The realtors or brokers who are the interface with the consumers in the transaction processes are the most important human resource and like in the business chain. They provide the advice, information and negotiate the deals and in short, make the markets. Unless this segment of the real estate industry is reformed and elevated to international standard practices, investor confidence will be difficult to emerge. Ultimately, on the one hand, it is the globalised investment opportunities in Indian economy which are at stake and on the other, the end consumers.

    Gokul Kripa is a name that has become a synonym of trust in the mind of investors in Jaipur. Gokul Kripa Colonisers and Developers (P) Ltd. is the fastest growing company in the field of real estate development and construction in the city of Jaipur. - See more at: http://needtodial.com/index.php?page=item&id=12&redirect=1#sthash.CVT9DQYa.dpuf

    We are colonizers and We have lonched new Project near by AJMER ROAD NATIONAL HIGHWAY. Good Project for INVESTMENT Perpose

    Please get information from Here:

    http://needtodial.com/index.php?page=item&id=12&redirect=1

    Thanks
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total views
2,760
On SlideShare
0
From Embeds
0
Number of Embeds
1,083
Actions
Shares
0
Downloads
202
Comments
1
Likes
8
Embeds 0
No embeds

No notes for slide

Investor psychology aspects of investor psychology for financial advisors

  1. 1. Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  2. 2.  What do you want from today’s session? What Women Want (2000) *ing MelGibson and Helen Hunt What do Investors Want? (1993 –ongoing) What do Investors REALLY Want (2012)Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  3. 3.  Utilitarian Benefit› Returns and what money can finally buy Expressive Benefit› My tastes, status, values Emotional Benefit› Feel safe, excited, hope, dreamRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  4. 4.  IQ of 200 means intelligent or rational? IQ = Logic = Rationality? Why then EQ? and now SQ? Do we use the rational framework?› Update beliefs for new information – Bayes› Make normatively acceptable choicesrational choices? Thinking fast and slow› Perfect Self Interest› Perfect InformationRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  5. 5. Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  6. 6. The Tree of BiasesCognitiveBelief Perseverance (6)Cognitive DissonanceConservatismConfirmationRepresentativenessIllusion of ControlHindsightInformation Processing(7)Anchoring and AdjustmentMental AccountingFramingAvailabilitySelf Attribution BiasOutcome BiasRecency BiasEmotional(7)Loss AversionOverconfidenceSelf ControlStatus QuoEndowmentRegret AversionAffinityRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  7. 7.  Bias Type: Cognitive Subtype: Belief Perseverance Basic building block of off beliefperseverance biases When newly acquired information conflictswith preexisting understandings peopleoften experience mental discomfort Purchase the iPhone 5 only to see thelaunch of the Galaxy S4 – go to great painsto justify initial purchaseRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  8. 8.  Bias Type: Cognitive Subtype: Belief Perseverance Basic building block of off beliefperseverance biases When newly acquired information conflictswith preexisting understandings peopleoften experience mental discomfort Purchase the iPhone 5 only to see thelaunch of the Galaxy S4 – go to great painsto justify initial purchaseRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  9. 9.  Bias Type: Cognitive Subtype: Belief Perseverance Mental process in which people cling totheir prior views or forecasts at theexpense of acknowledging newinformation Difficulty in processing new information,reacting slowly to new informationRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  10. 10.  Bias Type: Cognitive Subtype: Belief Perseverance Type of selective perception thatemphasizes ideas the confirm our beliefswhile devaluing whatever contradictsour beliefsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  11. 11.  Bias Type: Cognitive Subtype: Belief Perseverance When confronted with a newphenomenon that is inconsistent withany preconstructed classifications,people subject it to those classificationsanyway, relying on a rough, best fitapproximationRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  12. 12.  Bias Type: Cognitive Subtype: Belief Perseverance Tendency to believe that we can controlor atleast influence the outcomes Las Vegas Gambling Comfort with risky involvement / privatefunding if done directlyRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  13. 13.  Bias Type: Cognitive Subtype: Belief Perseverance Once an event has elapsed, peopletend to perceive that the event waspredictable – even if it wasn’t Actual outcomes are more readilygrasped by peoples minds than theinfinite array of outcomes that couldhave but didn’t materializeRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  14. 14.  Bias Type: Cognitive Subtype: Information Processing Tendency to code, categorize andevaluate economic outcomes bygrouping assets into non-fungible mentalaccounts $30 and $9 gamble example Goals based investingRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  15. 15.  Bias Type: Cognitive Subtype: Information Processing When required to estimate the valuewith unknown magnitude, people beginby envisioning some initial defaultnumber which becomes an anchorwhich they adjust up or down to reflectsubsequent information and analysis Purchase price anchoring Earnings estimates and revisionsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  16. 16.  Bias Type: Cognitive Subtype: Information Processing Respond to situations differently basedon how something is presented Narrow Framing and Broad Framing› Wealth and Profits Absolute versus relative performanceRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  17. 17.  Bias Type: Cognitive Subtype: Information Processing Rule of thumb or mental shortcut thatcauses people to estimate the probabilityof an outcome based on how prevalent orfamiliar that outcome appears in life Air travel insurance Property prices always go up Home country and investment biasRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  18. 18.  Bias Type: Cognitive Subtype: Information Processing Heads I win, tails its’ chance! Tendency to ascribe success to innateaspects of the individual such as talentand foresight and blame failures onoutside influences and luckRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  19. 19.  Bias Type: Cognitive Subtype: Information Processing Decision based on outcome of pastevents and actual outcomes rather thanprocess for achieving the outcome Understanding of what is important Skill vs LuckRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  20. 20.  Bias Type: Cognitive Subtype: Information Processing More prominently recall recent eventsand observations than those thatoccurred in the distant past Its different this timeRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  21. 21.  Bias Type: Emotional Prospect theory Stronger impulse to avoid losses than toacquire gainsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  22. 22.  Bias Type: Emotional Unwarranted faith in ones intuitivereasoning, judgments and cognitiveabilities Emotionally charged behaviour such asrash driving, excessive risk takingRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  23. 23.  Bias Type: Emotional Lack of discipline and self control Fail to act in pursuit of long termoverarching goals because of a lack ofdiscipline Inability to start saving young Important vs Urgent distinctionRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  24. 24.  Bias Type: Emotional Choice based on whatever optionratifies or extends the existing condition If a portfolio is built, very difficult tochange it dramatically Selling stocks once they have beenboughtRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  25. 25.  Bias Type: Emotional Value an asset more when it belongs toyou rather than when it is not in thepersons possession Minimum selling price for something ismore than the minimum purchase pricefor the same thing Inherited assets vs purchased assetsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  26. 26.  Bias Type: Emotional Avoid taking decisive actions becauseof the fear that the course selected willprove less than optimal Avoid the emotional pain of regretassociated with poor decision making Staying out of market after a loss Holding losing positions too long Herd behaviourRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  27. 27.  Bias Type: Emotional Choice made based on how onebelieves that a certain product orservice will reflect their values to others Expressive benefits of a product than onwhat it actually doesRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  28. 28. Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  29. 29.  A bat and a ball together cost $1.10. Thebat costs $1.00 more than the ball. Howmuch does the ball cost? Are you an above average driver? If it takes 5 machines 5 minutes to make5 widgets, how long would it take 100machines to make 100 widgets?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  30. 30.  A health survey was conducted in asample of adult males in Bombay, of allages and occupations. Please give yourbest estimates of the following values:› What percentage of the men surveyed havehad one or more heart attacks?› What percentage of the men surveyed areboth over 55 and have had one or moreheart attacks?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  31. 31.  Imagine these are four playing cards laidout in front of you. Each one has a letteron one side and a number on the other.If a card has an E, it should have a 4.Which cards do you need to turn over inorder to see if I am telling the truth?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  32. 32. Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  33. 33.  Suppose an unbiased coin is flippedthree times, and each time the coinlands on heads. If you had to bet $1000on the next toss, what side wouldchoose? Heads, tails or no preference?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  34. 34.  Imagine that the Bombay is preparing forthe outbreak of an unusual disease,which is expected to kill 600 people. Twoalternative programs to combat thedisease have been proposed. Assumethe exact scientific estimates of theconsequences of the programs are asfollows:Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  35. 35.  If program A is adopted 200 people willbe saved. If program B is adopted there is a 1/3probability that 600 people will besaved, and a 2/3 probability that no onewill be saved. Which program do you choose?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  36. 36.  Linda is 31 years old, single, outspoken,and very bright. She majored inPhilosophy. As a student, she was deeplyconcerned with issues of discriminationand social justice, and also participatedin anti-nuclear demonstrationsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  37. 37.  Which statement is more likely?› Linda is a bank teller› Linda is a bank teller and is active in thefeminist movement Would you want to be Linda’s friend?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  38. 38.  You are now going to play a game againstthe others sitting in this room. The game issimply this. Pick a number between 0 and100. The winner of the game will be theperson who guesses the number closest totwo thirds of the average number picked.Your guess is?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  39. 39.  If program C is adopted 400 people willdie. If program D is adopted there is a 1/3probability that nobody will die, and a2/3 probability that 600 people will die. Which program do you choose?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  40. 40.  In addition to what you already own,you have been give Rs. 1000. Nowchoose between› A – A 50% chance of winning Rs. 1000 more› B – Winning Rs. 500 for SURE. 100%Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  41. 41.  In addition to what you already own,you have been give Rs. 2000. Nowchoose between› C – A 50% chance of LOSING Rs. 1000› D – LOSING Rs. 500 for SURE. 100%Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  42. 42.  Where in the spectrum are you?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  43. 43.  A bat and a ball together cost $1.10. Thebat costs $1.00 more than the ball. Howmuch does the ball cost? Are you an above average driver? If it takes 5 machines 5 minutes to make5 widgets, how long would it take 100machines to make 100 widgets?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  44. 44.  A health survey was conducted in asample of adult males in Bombay, of allages and occupations. Please give yourbest estimates of the following values:› What percentage of the men surveyed havehad one or more heart attacks?› What percentage of the men surveyed areboth over 55 and have had one or moreheart attacks?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  45. 45.  Imagine these are four playing cards laidout in front of you. Each one has a letteron one side and a number on the other.If a card has an E, it should have a 4.Which cards do you need to turn over inorder to see if I am telling the truth?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  46. 46. Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  47. 47.  Suppose an unbiased coin is flippedthree times, and each time the coinlands on heads. If you had to bet $1000on the next toss, what side wouldchoose? Heads, tails or no preference?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  48. 48.  Imagine that the Bombay is preparing forthe outbreak of an unusual disease,which is expected to kill 600 people. Twoalternative programs to combat thedisease have been proposed. Assumethe exact scientific estimates of theconsequences of the programs are asfollows:Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  49. 49.  If program A is adopted 200 people willbe saved. If program B is adopted there is a 1/3probability that 600 people will besaved, and a 2/3 probability that no onewill be saved. Which program do you choose?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  50. 50.  If program C is adopted 400 people willdie. If program D is adopted there is a 1/3probability that nobody will die, and a2/3 probability that 600 people will die. Which program do you choose?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  51. 51.  Linda is 31 years old, single, outspoken,and very bright. She majored inPhilosophy. As a student, she was deeplyconcerned with issues of discriminationand social justice, and also participatedin anti-nuclear demonstrationsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  52. 52.  Which statement is more likely?› Linda is a bank teller› Linda is a bank teller and is active in thefeminist movement Would you want to be Linda’s friend?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  53. 53.  You are now going to play a game againstthe others sitting in this room. The game issimply this. Pick a number between 0 and100. The winner of the game will be theperson who guesses the number closest totwo thirds of the average number picked.Your guess is?Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  54. 54.  In addition to what you already own,you have been give Rs. 1000. Nowchoose between› A – 50% chance of winning Rs. 1000 more› B – Winning Rs. 500 for SURE. 100%Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  55. 55.  In addition to what you already own,you have been give Rs. 2000. Nowchoose between› C – A 50% chance of LOSING Rs. 1000› D – LOSING Rs. 500 for SURE. 100%Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  56. 56.  Work on a ADAPT or MODERATE modelRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  57. 57.  Encourage clients to adopt a broadview of their wealth, prospects andobjectives. Encourage clients to make long-termcommitments to policies Encourage clients not to monitor resultstoo frequently Discuss the possibility of future regret withyour clientsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  58. 58.  Ask yourself if a course of action is ‘out ofcharacter’ for your client Verify that the client has a realistic viewof the odds, when a normally cautiousinvestor is attracted to a risky venture Encourage the client to adopt differentattitudes to risk for small and for largedecisionsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  59. 59.  Attempt to structure the client’s portfolioto the ‘shape’ that the client likes best(such as insuring a decent return with asmall chance of large gain) Make clients aware of the uncertaintyinvolved in investment decisions Identify the aversion of your clients to thedifferent aspects of risk, and incorporatetheir risk aversions when structuring aninvestment program.Rohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450
  60. 60. Behaviorally YoursRohan Dinesh Ghallarohan@leapgrowth.com+91 98193 90450Credits: Michael Pompian and James Montier across their variouspublicationsRohan Dinesh Ghalla | rohan@leapgrowth.com | +919819390450

×