In Investing Don't React suddenly





Wait before taking action and avoid `attractive' options.

Knee-jerk reactions are not good either for your emotional or financial well-being. So, be it buying stocks that have suddenly shot up, redeeming mutual fund units at the first hint of a market correction, or changing your job just because you are offered a higher pay package are all impulsive reactions.

A good fallout of the economic downturn and volatility since 2008 has been that it has helped investors condition their responses. As many as 72% of the respondents claim that if their investment is not faring well, they don't dump it outright, but wait and analyse the reason before taking any action.

Discipline is at the core of any aspect of financial planning. But how do you inculcate it? Stick to your decision, strictly follow your budget, and don't digress from your asset allocation. Don't fall for schemes that appear too attractive. If it looks too easy, avoid.

IF YOU DO, YOU SUFFER FROM AFFECT HEURISTIC

If feelings dictate your financial decisions instead of logic, you are a victim of this bias. You want to take a quick decision and analysis takes time, so you fall back on the prevailing emotion--joy, fear, shock. Inevitably, you live to regret it.

HOW TO OVERCOME IT:

Instead of taking a decision during an emotional high or low, write it down and keep it away. Return to the scrap of paper after a couple of days or a week, analyse the pros and cons, and then decide. Better still, research.