#OutlookEvents | At IDFC FIRST Bank presents Outlook Money 40 After 40, Devina Mehra, Founder & Chairperson of First Global, explores how cognitive biases shape investment decisions. From herd mentality to loss aversion and storytelling traps, she explains why human evolution hardwires us for errors - and how data-driven investing is the key to overcoming them.
Watch her full video here: https://www.youtube.com/watch?v=HYzXOSOsMaA
#IDFCFIRSTBank #CelebrateRetirement #OutlookMoney40after40 #OutlookMoney #40After40 #FinancialPlanning
Watch her full video here: https://www.youtube.com/watch?v=HYzXOSOsMaA
#IDFCFIRSTBank #CelebrateRetirement #OutlookMoney40after40 #OutlookMoney #40After40 #FinancialPlanning
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LearningTranscript
00:00One of my favorite topics, I always say that I can teach a whole business school course on biases
00:05because basically, I mean, the basic principle why biases are there and why they are so hard
00:12to get rid of is that they are hard-coded within you through human evolution. So as I always say,
00:21your brain is not concerned about the health of your portfolio. Your brain is only one,
00:25two things, survival and procreation. And many times, those are at odds with what you should be
00:33doing for your portfolio. So for example, you know, there is always a FOMO feeling,
00:37aray mere friend ne wo PSU mein paisa bana liya, defense mein bana liya, so I have to get in.
00:41And that's the psychology behind a lot of thematic funds that are launched. All the NFOs
00:46are based on this psychology. But why do we have this? And why do we, for example,
00:52want to buy a Gucci bag or a Tumi computer bag or something? The core of that is that you want to
01:00belong to a tribe. Because when we were living in caves, if you got out of the tribe, you definitely
01:07could not procreate and you might not survive. So we are the, our ancestors were people who have
01:13chosen to stay on in the tribe. So that's the reason why we want to be where everybody else is.
01:18We don't want to think for ourselves. So this is one. Then there is loss aversion that we know the
01:25stock has gone down, but we hate actually booking the loss. You know, this is something. So that is why
01:30I'm saying always have a system. Don't think market girega tab sochaenge kya karna hai. When you enter a
01:36stock, as I said, tell yourself, I may be making a mistake, put a stop loss. So this is another one.
01:42You know, storification, you know, human beings, one thing which is common across all human beings,
01:48all civilizations from the most sophisticated to the most primitive across geography is stories.
01:55We remember stories. We teach through stories. We are storytellers and listeners. So that is why I
02:03say look at data. And for a lot of fund managers have very creative stories about why they, you know,
02:11how they buy a stock, why they are holding a particular stock. And the problem with stories
02:16is that over a period of time, you tell it enough times, you also start to believe it.
02:22So if you look at Warren Buffett, for instance, you know, his most famous call is Coke. I mean,
02:27I'm just using him as an example because he's well known, not that he's the worst example or anything
02:32like that. That Coke, that is this great brand, great cash flows. But because he kept telling that
02:38story, he didn't sell that stock. For 30 years, that stock is a huge underperformer relative to the
02:44index and relative to Pepsi. So last I looked in 30 years, it had gone up 12 times, the SNP had gone up
02:5218 times and Pepsi, I think had gone up 24 or 25 times. So that's the stories keep you captive. The
03:00market has, is not a person. So it has no interest in how carefully you have crafted your stories.
03:07So only one thing matters, which is numbers and data.