The document explores the relationship between psychology and finance in behavioral finance, emphasizing how psychological factors such as loss aversion, decision paralysis, and mental accounting influence investment decisions. It discusses various cognitive biases, including the endowment effect and overconfidence, that affect investor behavior and decision-making processes. Moreover, it introduces prospect theory and SP/A theory, highlighting how emotions like hope and fear can shape investment choices and outcomes.

1. WORKSHOP-BEHAVIOURAL FINANCE
1- Psychology + Finance
2- Sentiments + Investment Decision
3- Refereral + Investment Decision
4- Lack of Fundamental Research
5- Fast Changes in Investment Industry

2. FINANCE AND PSYCHOLOGY
• “Creating wealth from equity investing is not purely a
number game. In fact, it is more of a mind game. Each
one of us reacts to a financial situation differently. Unless
an investor considers psychological angle to investing,
wealth creation will always remain an illusion”

3. FINANCE AND PSYCHOLOGY
• Equities are considered inherently riskier than
investments in bonds.What makes equity investing risky?
Is it because of the inconsistent performance of
businesses behind the stocks or is it because of
thebehavior of the market participants, who as a result of
greed and fear get excessively optimistic and pessimistic
about the future resulting in bull and bear phases?

5. DR.RITESH AMARSELA
BBA(HR),MBA(MARKETING),
M.COM(FINANCE),PH.D(MARKETING)
• ASSOCIATE PROFESSOR
• SEBI - FINANCE TRAINER
• RESEARCHER
• EDUPRENEUR
• BUSINESS CONSULTANT
• CAREER COUNSELLOR
• PLACMENT OFFICER
• INVESTMENT PLANNER
6 YEARS CORPORATE
16 YEARS TEACHING
8 YEARS TRAINING

6. Quiz 1
• You Are Given Rs.1000 And Two Options
• A: Guaranteed win of additional Rs.500
• B:Chance to flip a coin.If it’s heads you receive another
Rs.1000 and with tails you get nothing more

7. Quiz 2
You Are Given Rs.2000 and Two Options
• You are guaranteed to lose Rs.500
• Chance to flip a coin.If it’s heads you lose Rs.1000 and
with tails you lose nothing

8. Loss Aversion
• Investors take more risk when faced with a loss and are
more conservative to lock in sure profits

9. Investor Behavior Due To Loss Aversion
• Investors tend to go for sure gains
• Take more risk when threatened with a loss.
• Investors prefer fixed income investments over stocks
• Tendency to hold losers and sell winners

10. Quiz 3
• You Have Complimentary Tickets For Filmfare Awards
• On the evening of the program there is a severe rainstorm
and traffic is disrupted due to floods
• You have to travel from your home in Nadiad to
Ahmedabad
• Would you go?

11. Quiz 4
• You Have Bought Rs.1500/-Tickets For the Filmfare
Awards
• On the evening of the program there is a severe rainstorm
and traffic is disrupted due to floods
• You have to travel from your home in Nadiad to
Ahmedabad
• Would you go?

12. Sunk Cost Fallacy
• Increasing your commitment to justify past actions.
• Ego gets tied to commitment

13. Banking Industry
• Borrowers business runs into trouble
• Bankers lend additional funds to borrowers

14. Sunk Cost Fallacy And Investment Decisions
• Averaging cost of purchases
• Spending on repairs
• Government
• spending on favorite unviable projects

15. FINANCIAL BEHAVIOUR-CASE STUDY
• You inherited from your Uncle Rs 50 Lakh on the
condition that you invest in the capital markets
• Will you invest in Bond or FD?

16. FINANCIAL BEHAVIOUR-CASE STUDY
• You inherited from your uncle Rs 50 Lakh in a portfolio of
stock
• Will You ?
• Leave the portfolio as it is
• Sell the stocks and invest in Bonds

17. Decision Paralysis / Status Quo
• going wrong
• make a loss
• look foolish
• unwillingness to take risks

18. FINANCIAL BEHAVIOUR- CASE STUDY
• You have been gifted a Souvenir jug worth Rs. 100 (in the
marketplace). Someone offers to buy it from you
• What is the very least that you would expect to be paid for
the jug?
• A- Rs-100 B- Rs-50 C-Rs-500

19. FINANCIAL BEHAVIOUR- CASE STUDY
• Your neighbor has received a Souvenir jug worth Rs. 100
(in the marketplace) as a gift. He offers you the jug for
sale
• What is the most that you are willing to pay for the jug?
A- Rs-50 B- Rs-100 C Rs-200

20. Endowment Effect
• The value of a good increases when it becomes a part of
a person’s endowment.

21. Endowment Effects In Capital Markets
• Investors always mentally overvalue the stocks they hold

22. Example of Behavioural Anomalies
• Mr. A Holding 7000 shares of HFCL @ 70
• March 2000 – HFCL price - Rs 2500 (Anchored to this price)
• June 2000 – HFCL price - Rs 1500 (Loss Aversion at this price)
• Needs money but suffers from (Decision Paralysis between 2 options)
Real Estate or HFCL shares
June 2000 – Sold off real estate instead of HFCL shares.
June 2002 – HFCL price - Rs 56 (Endowment Effect at this price)
Thinks market is undervaluing HFCL & is still holding on to it.

23. You Are A Victim Of Loss Aversion and Sunk Cost
• Prefer Fixed income securities over Stocks
• Sell winning investments more readily
• Exit the stock Market when prices fall
• Make important spending decisions based on your past
spending

24. Be Free from Loss Aversion and Sunk Cost Fallacy
• Test your threshold for loss
• Diversify
• The big picture: Investment Plan
• Start Afresh
• Reframe losses as gains
• Segregate gains and integrate losses

25. You May Be Suffering From Decision Paralysis If You….
• Cannot choose between Investment Options
• Do not have a retirement plan
• Delay making decisions
• Buy on trials but never return
• Fall in love with stocks you own
• Go to company visits and buy stocks

26. Freedom from Status Quo Bias and Endowment Effect
• Don’t forget opportunity costs
• Put yourself on autopilot
• Change frame of reference
• Don’t fall in love with your stocks
• There is no free lunch

27. Plan Of Action
• Investment Plan On Paper
• Knowledge is important: Hire the right professionals
• Ignore money already spent and focus on future cost and
benefits
• Don’t get married to your stocks
• Understand your bias and use it to your advantage

28. Mental Accounting - Pillars of
Behavioral Finance
Money Is Fungible
• This means that Rs. 100 in lottery winnings, Rs.100 in
salary and a Rs. 100 tax refund should have the same
meaning as they have the same purchasing power
• It is the tendency to place different values to the same
sum of money

29. Types of Mental Accounts
• Earned income v/s gift income
• Size of the money in question
• Large financial decision v/s small purchases
• Cheap money v/s costly money
• Sacred money

30. Investor Behavior due to Mental Accounting
• Hold on to losing investments
• Earn less interest and pay more interest
• Bonus shares
• Day traders

31. Cognitive Illusions Are Like Optical Illusions
• Which Line Appears Longer?

32. Which Line Appears Longer?

33. Measurement Tools Help Identify Illusions

34. Mental Heuristics
• Cause Investors to form Biased Expectations

35. Five Types Of Heuristics
• Availability
• Representative
• Saliency
• Overconfidence
• Anchoring

36. Availability: React to recall value
• Mid Cap story
• IPO fad
• India Shining
Leads to…… HERD MENTALITY

37. Representative: Similarity
• Over react to new information Over react to new
information
• Second rated stocks : steel, banking, cement
• Biocon……..
• Company changing names to be with the current fads

38. Saliency:Events which occur infrequently
• Over react to new information Over react to new
information
• Good or bad quarterly results by a company
• Commodities Boom
• Treasury gains
• Higher expectations from Indian Equities

39. Overconfidence: Smarter than they really are
• Under React to New Information Under React to New
Information
• UTI misses opportunity to become NAV based
• Mutual Funds launching Mid Cap schemes
• Mega expansions due to low interest rates

40. Anchoring: Locked to the Past
• Under React to New Information
• Investors could not exit IT stocks
• Black Monday pains
• High returns from Debt Funds
• Causes Decision Paralysis

41. Warren Buffet
• “Success in investing doesn’t correlate with IQ once you
are above the level of 25. Once you have ordinary
intelligence, what you need is the temperament to control
the urges that get other people in to trouble in investing”

42. You are prone to Mental Accounting if You…
• Don’t think you are a reckless spender but unable to save
enough
• Have savings in your bank but revolving balances on your
credit cards
• Are more likely to splurge with a tax refund than with savings.
• Tend to spend more when you use credit cards
• Put retirement savings in fixed income or other conservative
investments.

43. Plan of Action
• Be Patient
• Imagine all income is earned income

44. FORM OF OVERCONFIDENCE
1-Miscalibration
• people make probability judgements by looking for
similarities to other known observations, forgetting that
there are many other possible observations. Yet another
explanation is that people nurture illusions. For example,
an investor may say, “If I buy a stock, it will go up
afterwards.”

45. FORM OF OVERCONFIDENCE
2- Better than average effect
• When people are asked to rate themselves on some
positive personal attribute (such as driving skill or
teaching ability) relative to others, most tend to rate
themselves above average on those attributes. This is
called the better-than-average effect
• For example, in one survey done by O. Svenson, 82% of
the respondents rated themselves.however, only 50% of
the people in any group can be better-than-average.

46. FORM OF OVERCONFIDENCE
3- Optimistic Bias
While optimism is a great life strategy, it isn’t a good
investment strategy.
Benjamin Graham noted, “Observation over many years
has taught us that the chief losses to investors come from
the purchase of low-quality securities at times of favorable
business conditions.
To defend ourselves against over-optimism, we must learn
to become more critical

47. Overconfidence and Earnings Manipulation
• As Ramalinga Raju confessed in his 2009 letter to the
board of Satyam Computers: “What started as a marginal
gap between actual operating profit and the one reflected
in the books of accounts (and publicly reported) continued
to grow over the years. It has attained unmanageable
proportions.”

48. CAUSES OF OVERCONFIDENCE
• 1-Illusion of Knowledge
• People tend to believe that the more information they
have, the more knowledgeable they are, and the more
accurate their forecasts are likely to be. However, greater
information does not necessarily lead to greater
knowledge
• “The whole investment industry is obsessed with learning
more and more about less and less, until we know
absolutely everything about nothing.”

49. CAUSES OF OVERCONFIDENCE
• 2- Illusion of Control
People tend to become more overconfident when they feel
that they have control over the outcome.
This misconception create the overcofidence which result in
wrong investment decision because investment outcome is
no more controllable because external factors affecting to
the investment outcome

50. CAUSES OF OVERCONFIDENCE
• 3- Illusion of Understanding
• ” We fool ourselves by constructing flimsy stories and
nurture the illusion of understanding
• “ I am only knowledgeable in my peer group and
everyone must follow my advice or suggestion. This affect
to investment decision because investment is not only
depend on fundamental analysis but it also depend on
technical analysis
• Illusion of undestanding may affect to right investment
decision in irrelevant investment tool

51. CAUSES OF OVERCONFIDENCE
• 4- Illusion of Validity
• As Kahneman put it: “For some of our most important
beliefs, we have no evidence at all, except that people we
love and trust hold these beliefs.
• Considering how little we know, the confidence we have
in our beliefs is preposterous – and it is also essential.”
He coined the term the illusion of validity to describe this
cognitive illusion.
• For Example- investment decision only on the trust of
relatives working as an insurance agent

52. CAUSES OF OVERCONFIDENCE
• 5-Illusion of Skill
• Billions of shares are traded every day because buyers think the price is too low
and likely to rise and sellers think the price is too high and likely to fall. Why do
they have different opinions when most of the buyers and sellers have access to
the same information? Why do they believe that they know more about what the
price should be than the market does? In general, that belief is an illusion of
skill.
• Terry Odeon studied the trading records of 10,000 brokerage accounts of
individual investors over a seven-year period. He identified all instances in which
an investor sold some stock and soon after bought another stock
• The result is 4% loss due to sale of previous stock and buying new stock plus
transaction charges

53. FORMS OF SELF-DECEPTION
• 1-Avoidance of Cognitive Dissonance
• When newly acquired information is at variance with pre-
existing understanding, people usually experience mental
discomfort which is referred to as cognitive dissonance.
• In psychology, cognitions represent attitudes, emotions,
beliefs, or values and cognitive. dissonance is the
imbalance that arises when contradictory cognitions
interact.Example- On tips we bought the applied for IPO
and but then negative information flow about IPO then our
behaviour change about IPO

54. FORMS OF SELF-DECEPTION
• 2- Self-Attribution Bias
• Self-attribution bias means that people tend to ascribe
their success to their skill and their failure to their bad
luck. Harvard psychologist Langer called this
phenomenon as “head I win, tail it’s a chance.”
• When our investment products give good return we belive
that it is due to good finance knowledge that investor
have and when investment products give negative return
investor start blaming to their investment advisor

55. FORMS OF SELF-DECEPTION
• 3-Confirmation Bias
• People tend to overlook information that is contrary to
their views in favour of information that confirms their
views. While we think that our beliefs are the result of
years of experience and objective analysis, the reality is
that all of us are susceptible to confirmation bias.
• As Tim Sanderson put it, “We all ignore information that
disputes our expectations.

56. FORMS OF SELF-DECEPTION
• 4-Hindsight Bias
• People have a tendency to view events as more
predictable than they really are. This bias is called the
hindsight bias
• It is often referred to as the “I-knew-it-all-along
phenomenon.”
• For Example- Expectations of investors from Reliance
Power IPO

57. FORMS OF SELF-DECEPTION
• 5-Naïve Realism
• People think that they see the world directly, as it really is.
They further believe that the facts as they see are there
for all to see and hence others should agree with them.
This may be called naïve realism and it causes a great
deal of Conflict
• Many insurance adviosrs sold the ULIP plan in 2007 as a
guaranted return product only on the belief that stock
market will perform well

58. FORMS OF SELF-DECEPTION
• 6- Distorted Self-perceptions
• It seems easier to spot a cheater when we are looking
outward, but harder when we are looking inward. A
Nigerian proverb says, “A he-goat doesn’t realise that he
smells.”
• Japanese proverb says, “Though we see the seven
defects of others, we don’t see our own ten defects.”
• For Example- When we see the 10% loss in our
investment portfolio we feel sad but when we see the
15% loss of our negihbour we feel less sad

59. Prospect Theory and Mental Accounting
• Daniel Kahneman and Amos Tversky looked at how people make
decisions in the face of risk. They established a dozen facts and several
of these were inconsistent with expected utility theory. So, they
developed a theory that modified expected utility theory just enough to
explain the collection of their observations and called it prospect theory
in their seminal paper titled “Prospect Theory: An Analysis of Decision
under Risk.”
• This chapter discusses the essentials of prospect theory along with
mental accounting, two cornerstone ideas of behavioural finance. It also
discusses SP/A theory and framing effects. It is divided into five sections
as follows

60. ERROR IN BERNOULLI’S THEORY
• According to Bernoulli’s theory, utility depends on wealth
and since Ram and Shyam have the same wealth, they
should be equally happy
• Today Ram and Shyam have a wealth of ` 10 million.
Yesterday, Ram had ` 5 million and Shyam had ` 15
million.Is their happiness the same? (Do they have the
same utility?)
• The happiness that Ram and Shyam experience is a
function of the recent change in wealth

61. PROSPECT THEORY
• In their 1979 Econometrica paper mentioned earlier,
Daniel Kahneman and Amos Tvesky provided a new
theory of risk attitudes, called “prospect theory,”
• According to utility theory happiness increases when
profit increases but what amout of happiness increases at
what level of profit is not defined in utility theory
• In prospect theory author had given the overview about
the level of happiness and level of profit through value
function

62. PROSPECT THEORY

63. PROSPECT THEORY

64. PROSPECT THEORY
• The value function is concave for gains. This means that
people feel good when they gain, but twice the gain does
not make them feel twice as good
• The value function is convex for losses. This means that
people experience a pain when they lose, but twice the loss
does not mean twice the pain.
• If you gain 100 grams in weight, you won’t notice it, but if
you are buying gold, the difference, between 100 grams
and 200 grams is obvious.

65. SP/A THEORY
• SP/A theory, a psychologically based theory of choice
among risky alternatives, was proposed by Lola Lopes and
further developed by Lopes and Oden. Lopes’ 1987 article
• “The Psychology of Risk: Between Hope and Fear,” captures
the idea that the emotions of hope and fear influence the
choice among risky alternatives
• According to SP/A theory, people evaluate risky alternatives
by using an objective function which has three arguments,
viz., security (S), potential (P), and aspiration (A)

66. SP/A THEORY
• According to this theroy there are two main elements
important for investors
• 1- HOPE 2- FEAR
• On the basis of above two elements behavioural scientist
had given the following type of investors
• 1- Investor who experiences neither fear nor hope
• 2- Investor who experiences only fear, and no hope
• 3-Investor who experiences only hope, and no fear
• 4-Investor who experiences both fear and hope,

67. SP/A THEORY

68. FRAMING
• There can be different ways of presenting a decision problem and it appears
that people’s decisions are influenced by the manner of presentation
• A decision frame represents how a decision maker views the problem and its
possible consequences.
• EXAMPLE- How many student want to start job after study? Chances of
getting job is 80% and How many students want to start business ? chances of
failure in business is 100% during first two years
• Example- Job will give you maximum salary of Rs-200000 pm within five years
and Business will give you income of Rs-200000 per day after five years
• In general, our response depends on whether something is presented in
terms of gains or in terms of losses.

69. MENTAL ACCOUNTING
• The concept of mental accounting was proposed by Richard
Thaler, one of the brightest stars of behavioural finance
• Businesses, governments, and other establishments use
accounting systems to track, separate, and categorise various
financial transactions
• People, on the other hand, use a system of mental accounting.
• The human brain is similar to a file cabinet in which there is a
separate folder (account) for each decision, which contains the
costs and benefi ts associated with that decision.

70. MENTAL ACCOUNTING
• Mental accounting can influence a person’s decisions in unexpected ways as
the following example suggests
• Mr. and Mrs. Sharma have saved ` 10 lakhs for their daughter’s wedding that
may take place 3 years from now. The money earns interest at the rate of 9%
in a bank fixed deposit account. They just bought a new car for ` 6 lakhs on
which they have taken a 3 year car loan at 12%.
• The above example suggests that people often have money in a fixed deposit
account (earmarked for a certain purpose) that earns a low rate of interest and
yet they borrow money at a high rate of interest for some other purpose
• While money does not come with labels, the human mind puts labels on it. Mr.
and Mrs.Sharma labelled their fixed deposit as “daughter’s wedding provision”

71. THEORIES OF EMOTIONS
• Philosophers, researchers, and psychologists have
proposed different theories to explain the what, why, and
how behind human emotions. The major theories of
emotions may be grouped into two main categories:
• Physiological theories
• Cognitive theories

72. THEORIES OF EMOTIONS
• 1- James–Lange theory of emotions
• According to this theory, an external stimulus leads to a
physiological response which, in turn, leads to an
emotional reaction, depending on how the person
interprets the physiological response. For example,
suppose you see a snake in your backyard and you begin
to tremble and conclude that you’re frightened (“I am
trembling, so I am afraid”).

73. THEORIES OF EMOTIONS
• 2-Cannon–Bard theory of emotions
• this theory says that both the emotion and physiological reaction
occur when the thalamus sends a message to the brain in
response to a stimulus.
• 3- Facial feedback theory of emotions
• According to this theory, facial expressions are not only the
results of our emotions but are also capable of infl uencing our
emotions. For example, when we smile, we experience pleasure
or happiness. Likewise, when we frown, we experience sadness

74. THEORIES OF EMOTIONS
• The Schachter–Singer theory of emotions
known as the two-factor theory of emotion, is an example of a cognitive theory of
emotion. According to this theory, there are two key components of an emotion:
physical arousal and cognitive label. This theory says that a mere physical arousal is
not enough; the person must also identify the arousal in order to feel the emotion
According to the two-factor theory, when you see a cobra snake in your backyard,
the sequence that follows would be much like this.
1. I see a cobra snake in my backyard.
2. My heart races.
3. My rapid heart rate is caused by fear.
4. I am frightened.

75. Two Dimensions of Emotions
• Emotional experiences may be measured along two
dimensions, viz., valence (how negative or positive the
experience feels) and arousal (how energising or
enervating the experience feels)

76. EMOTIONS AND INVESTING
• Emotions have a bearing on risk tolerance, and risk
tolerance influences portfolio selection.

77. FAIRNESS, RECIPROCITY, AND TRUST
• While most people accept that fairness is valued in our society, the notion of fairness
has been largely overlooked in traditional finance which assumes that economic
agents are driven by self-interest. In recent years, however, some researchers have
recognised the importance of fairness, reciprocity, and trust in the conduct of
business transactions.
• Trust is a prerequisite for an efficiently functioning economy. The costs of business
and personal transactions are Behavioural Finance significantly reduced if people
trust each other and treat each other fairly. Empirical evidence suggests that a large
number of people trust and treat others fairly, even when they are not likely to deal
with them in future. Tipping servers in restaurants is a commonplace example of
fairness and trust. People normally tip the servers, as long as the service is above a
threshold level. Although tipping is not required, people often do it out of a sense of
fairness.

78. SOCIAL INFLUENCE ON INVESTMENT
• Investing has become an integral part of social life. Not
only do we invest, but we also like to talk about them.
People discuss investments with their friends, coworkers,
neighbours, family members, or even strangers through
the web. This has created an interesting paradox. While
you want to invest independently, you also want to go by
the consensus view. Indeed the popular consensus acts
like social pressure.
• A- Herd Instincts and Overreaction
For example- Reliance Power IPO & Bajaj Finance IPO

79. Conformity - Social Influance
• Conformity in psychology is the tendency of people to
change their attitudes, behaviors, or beliefs to match
those of the people around them.
• Conformity can be a result of social pressure or
unconscious influence
• The impact of conformity can vary depending on factors
like age, gender, cultural background, and personality

80. BEHAVIOURAL PORTFOLIO THEORY
• Introduced by Hersh Shefrin and Meir Statman,
behavioural portfolio theory is a goal-based theory. In this
theory, investors divide their money into several mental
account layers, arranged as a portfolio pyramid. Each
layer corresponds to a specifi c goal such as buying a
house, paying for children’s education, having a secure
retirement, or being affluent enough to go on a world tour
whenever one chooses to.

81. BEHAVIOUR PORTFOLIO THEORY

82. KNOWING YOURSELF: PSYCHOGRAPHIC MODELS
• Psychographic models seek to classify individuals according to certain
characteristics, tendencies, or behaviours. They are helpful in
understanding risk tolerance and developing investment strategy
• Passive Investors As Barnewell notes: “Passive investors are defi ned as
those investors who have become wealthy passively, for example, by
inheritance or by risking the capital of others rather than risking their own
capital.
• Active Investors Barnewell notes: “Active investors are defined as those
individuals who have earned their own wealth in their lifetimes. They have
been actively involved in the wealth creation, and they have risked their
own capital in achieving their wealth objectives.”

83. BASIC INGREDIENTS OF A SOUND INVESTMENT
PHILOSOPHY
• 1-Focus on Process- In any probabilistic fi eld-investing,
business, or gambling, the emphasis should be on the
process, not on the short-term outcome
• Long-term Perspective In the world of investments,
there is too much randomness in the short run. A sound
investment philosophy calls for a long-term orientation
• Probabilistic Approach It is important to adopt a
probabilistic approach in the field of investing

84. GUIDELINES FOR OVERCOMING PSYCHOLOGICAL
BIASES
• Understand the Biases
• Focus on the Big Picture
• Rely on Words and Numbers, not Sights and Sounds
• Follow a Set of Quantitative Investment Criteria
• Diversify
• Take Care of the Downside
• Control Your Investment Environment
• Review Your Biases Periodically

85. The Four Stages of a Bubble

86. BOOK - BEHAVIOURAL FINANCE

88. THE EVIDENCE ON EQUITY RETURNS

89. Is Equity Investing Really Risky?
• It is the behavioral traits of the investor in particular and
the crowd behavior of the markets in general which
makes equity investing appear a risky proposition.
• Understanding the behavior of the stock markets is the
most difficult because markets are made on the basis of
varied opinions expressed by their participants.

90. WARREN BUFFETT- EQ
• The most successful investment money managers like
Warren Buffett, Charlie Munger, Peter Lynch owe their
success not only to their intellectual ability but also to their
discipline and emotional control.

91. Mr. Market Oscillates between Greed and
Fear
• Markets are made up of emotional people whose
decisions are based upon the prevailing sentiments in the
environment. At times they display greed and at other
times this greed is displaced by fear. Bouts of greed and
fear make the stock prices volatile and investors get
trapped in such volatility to lose fortunes.

92. INVESTMENT DISCIPLINE
• Being disciplined in your investment approach is very
important.You don’t get opportunities everyday and one
must be prepared and ready with the money when
opportunities come.
• It so happens that investors tend to chase stocks wheN
they get tips and they are so much stuck up with
expensive stocks that when the markets tan and
opportunities arise they don’t have the money

93. ACID TEST- MIND AND HEART
• Real discipline and courage is: you buy when you
emotionally do not feel like buying, and sell when
your heart says no but the mind and the logic say
yes.

94. 10% Investors Follow the Emotional Way
• When your friends tell you about a great investment
opportunity, which could be a ten-bagger, and they feel
that it is a great time to buy or an opportunity will be lost:
don’t buy.
• When your favorite TV channel everyday has analysts
talking about great investment opportunities don’t buy.

95. BEHAVIOURAL FINANCE
• Behavioral finance is an emerging field that combines the
understanding of behavioral and cognitive psychology
with financial decision-making processes
• Most common of these mistakes involve selling winners
too soon and holding onto losers

96. ASSETS ALLOCATION
• asset allocation is the first step an investor should take
before even choosing how to invest. The ability to
understand the risk-reward ratio discounted in various
asset classes is critical in designing an asset allocation
strategy.
• Age - Risk Taking Ability - Equity and Safe investment
allocation of saving

97. Value Investing
• “Price is what you pay, Value is what you get.” Benjamin
Graham
• Growth stock investing is based on hunches,
dreams,illusions or popular opinion.They are better
termed as‘dream stocks’.
• Herd behavior is one of the reasons that growth stocks
goup very fast and attract investor attraction. They alsofall
very fast as the herd comesto sell

98. WHAT IS CONTRARIAN INVESTING?
• “If everybody else is doing it one way, there’s a good
chance you can find your niche by going in exactly the
opposite direction. [But] be prepared for a lot of folks to
wave you down and tell you you’re headed the wrong
way”—Sam Walton
• A contrarian investor can be defined as one who
attemptsto profit by betting against conventional wisdom

99. FOCUS ON VALUE NOT ON RETURN
• For an investor, the financial statements representing the
recent performance of the enterprise constitute an
indispensable tool. But the value is a function of the ability
of the enterprise to generate cash flows in the future.

100. QUESTIONS ALWAYS WELCOME
REMEMBER
• “LESS MARKS WITH SKILLS IS BETTER THAN GOOD
MARKS WITHOUT SKILLS”