Avoiding Behavioural Biases In Volatile Markets Is Important, Says Ganesh Mohan of Bajaj Finserv MF

At the second day of Outlook Money 40After40 Retirement Expo, Ganesh Mohan, Managing Director of Bajaj Finserv Mutual Fund, shared insights on how investors can navigate volatile markets, manage emotions, and improve returns by understanding behavioural biases and applying discipline. Avoiding behavioural biases in volatile markets is important, he said.

Right Place, Right Time

He said a lot of growth is happening in India and the next 15-20 years will see a lot of growth coming. But just by being in the right place at the right time will not fetch you the benefits. “You have to do something, you have to put in the right effort,” Mohan said.

He explained that while saving instruments like savings accounts or fixed deposits (FDs) are safe, they offer limited returns. “A sum of Rs 108 lakh crore is in FDs, Rs 16.5 lakh crore in post office deposits. People are looking for very safe instruments, but they need to actively manage their investments to make real progress,” he added.

Mohan added that most investors lose money in high-risk ventures like futures and options (F&O) or crypto. “About 91 per cent of investors lose money in F&O and 73 per cent of people who have invested in crypto have lost money. In the lottery, the chance of winning is only 1 per cent. We actually come from a very divergent school of thought when it comes to investing. This happens because we, and our biases, are the biggest enemies of our portfolio and its returns,” he said.

Behavioral Biases That Hurt Investors

According to Mohan, the biggest challenge for investors is their own behaviour. “Booking a loss is very, very difficult. People keep waiting till it comes back to that price, while at the same time they miss better opportunities,” he said, explaining the concept of loss aversion.

He also discussed herd mentality, referencing Salomon Asch’s experiment. “Even if you hear one voice that corroborates your view, you are willing to change it. If everybody is saying this is a good stock, a good asset class, or a good commodity, you move toward that. This is because we evolved as a tribe. In the tribe, you are valued when you conform. When you conflict, you would not last,” Mohan said.

Other biases, he said, were overconfidence and outcome bias. “People think that because they have lots of data, their chances of winning are higher. But your chance remains the same no matter how much data you have. Outcome bias happens when you invest for one reason and then judge the result by something else. These are simple mental mistakes, but they affect all of us, particularly if you are at a loss,” he said.

Tools and Discipline to Manage Emotions

Mohan spoke of practical steps to overcome emotional mistakes and improve investment outcomes.

“We should have simple tools, simple things. Investment checklists are very effective. Hospitals in the US have reduced mortality with checklists. Similarly, investment checklists reduce mistakes. Also, keeping an investment journal helps you understand your thought process, why you invested, and whether the reasoning still holds,” he said.

He highlighted the importance of discipline over intelligence. “Discipline trumps intelligence every day of the week in the markets,” he said, adding that proper asset allocation is also crucial: “You should clearly divide between immediate needs and long-term needs. You have different types of funds already available in our industry. If you follow these rules, you can reduce mistakes and stick to your plan.”

Mohan concluded with a reflective reminder: “Memento mori. We are all human beings. We all have our biases. We must remember that. And we must use tools that can help us de-bias and bring discipline into our investing lives.”