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Know The Secrets Of Conquering Deadly Sins Of Investing

Focusing on others’ perceived successes can lead to poor investment decisions. It’s important not to compare oneself to others without considering the risks they might have taken

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Conquering Seven Deadly Sins Of Investing Photo: Shutterstock
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Investing isn’t just about crunching numbers and analysing market trends; it’s also deeply intertwined with human behaviour. 

The third edition of Outlook Money’s 40After40 Retirement event which got underway in Mumbai on February 7, 2025, explored how common behavioural pitfalls, likened to the “seven deadly sins”, can sabotage investment success, particularly when it comes to retirement planning.

The panellists offered insights into managing these emotional biases and building a more secure financial future.

Greed And Fear: The Market’s Emotional Drivers

Navneet Munot, managing director and CEO, HDFC Asset Management kicked off the discussion by addressing the powerful influence of greed and fear. He pointed out that these emotions are inherent in market dynamics.  “The market exists because somebody is greedy and somebody is fearful,” he said.

He emphasised on the importance of disciplined investing and avoiding emotional reactions to market fluctuations, even minor ones.

Munot shared historical examples, from the 2008 financial crisis to more recent market dips, illustrating how easily investors can be swayed by short-term volatility.

He introduced the “STP” formula for wealth creation: Sound Investment plus Time plus Patience.

“Nobody should react to the market. You just respond by remaining disciplined, focusing on your goal, focusing on your asset allocation, and keep allocating money accordingly,” he said.

He also stressed on the crucial role of financial advisors in guiding investors through emotional market swings.

Lust For Quick Returns: Not Likely To Work In Your Favour 

 Kailash Kulkarni, chief executive officer (CEO), HSBC Mutual Fund spoke about the “sin of lust”, which he connected to the desire for instant gratification. He argued that the fast-paced nature of modern life, with its short attention spans, makes long-term investment strategies seem less appealing.

“This instant gratification in certain things can work very well. But in investing it is likely not to work in your favour,” he said.

Kulkarni acknowledged the allure of speculative investing, despite regulatory warnings about the risks involved. He advocated for consistent messaging around the importance of long-term investing and patience, presented in a way that resonates with younger generations.

Envy: The Thief of Joy And Financial Security

Rajeev Thakkar, chief investment officer (CIO) and director, PPFAS Asset Management, spoke on the “sin of envy”, highlighting its unique characteristic of being unenjoyable even while being committed. He explained how focusing on others’ perceived successes can lead to poor investment decisions.

“Individual successes don’t make averages,” he said. Thakkar cautioned against comparing oneself to others without considering the risks they might have taken. He emphasised on the importance of managing downside risk and focusing on one’s own financial goals. He also touched on how the pride element can lead people to chase exclusive investments, mistaking rarity for profitability.

Pride: Holding Onto Losing Investments

Ganesh Mohan, CEO, Bajaj Finserv Asset Management discussed the “sin of pride”, which can manifest as an unwillingness to admit investment mistakes. He described the “loss aversion bias” and the “get even it is”, where investors hold onto underperforming assets hoping to recoup their initial investment. 

“The pain of losing Rs 100 is much greater than the pleasure you get by booking a profit of Rs 100,” he said.

Mohan also addressed “overconfidence bias”, reminding investors that market conditions change and past successes don't guarantee future returns.

Sloth: The Danger Of Inaction

Thakkar also addressed the “sin of sloth”, cautioning against both excessive portfolio churning and complete neglect. He emphasised on the importance of reviewing investments periodically, driven by reason and changing circumstances, not just emotions or recent performance. 

Mohan added that there is a difference between staying still and doing nothing. Munot gave an example of how disciplined investing and staying in a fund for a long period of time, even though market ups and downs, can generate substantial returns. He did add the disclaimer that past performance is not indicative of future returns. He also highlighted the importance of reviewing your portfolio to ensure it aligns with your goals.

Wrath: The Impulsive Investor

Mohan explored on the “wrath” as a broader concept encompassing uncontrolled emotions, including panic. He explained how impulsive reactions, often triggered by market downturns, can lead to poor investment decisions.

“If you’re not [breathing normally], you’re most likely in a hot state. Just go take a walk,” he said. He advised investors to recognise when they are emotionally charged and take steps to calm down before making any decisions.

Turning Sins Into Strengths

Kulkarni offered a unique perspective on “sin”, suggesting it can be a motivator for positive change. He shared an anecdote about an industrialist whose success inspired his peers to adopt more transparent business practices. He argued that “envy”, for instance, can be channelled into positive action.

Looking Ahead: Opportunities In The Indian Market

The panellists concluded by briefly discussing the current market environment. They generally agreed that focusing on long-term goals and staying invested in the Indian market, “Bharat”, is the key. They downplayed the significance of short-term events like budgets and monetary policy announcements in long-term financial planning. They also emphasised on the vast untapped potential of the Indian investment market and the need for greater financial inclusion.

“Stay invested in this country called Bharat,” Kulkarni advised.

The panel discussion provided valuable insights into the psychological aspects of investing. By recognising and managing these common behavioural biases, investors can significantly improve their chances of achieving long-term financial success and a comfortable retirement.

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