The role of regulation is sustained capital appreciation and putting efforts towards finding an equilibrium between under and over-regulation that leads to two types of errors such as malpractices and lack of genuine market participation. Regulatory must also ensure that the market doesn’t dramatically change overnight.
Speaking at the 40After40 Retirement Expo, Ananth Narayan Gopalakrishnan, a Securities and Exchange Board of India (Sebi) Member elaborated on the role of regulations in mitigating the behavioural errors where he describes various errors made by investors.
The first error is fear and greed which symbolizes impulsive decisions made by the fluctuations made by the investors while monitoring the market.
The second error is overconfidence and overtrading where the traders who participate in trading based on frequent fluctuations rather than determined intervals tend to actually lose more money than they make.
Third error is of lack of attention to asset allocation has a negative effect on the difference in returns across portfolios. Investors prioritizing stop picking over asset allocation only making a miniscule difference while determining asset allocation across various asset classes affects the bulk of returns in your investment portfolios.
The fourth listed behavioural error is being blindly led by the finfluencers of social media, all roads lead to Rome (Capital Market Appreciation), but be careful who takes you there.
Gopalakrishnan describes various behavioural errors made by investors on a daily basis and how the regulations can mitigate this error, in his speech addressing the audience at the expo. Watch the video to know more.
