1. It is difficult to convince investors that a financial plan based on logic and risk-profiling has a much better chance to serve their financial goals than one based on emotions.
2. This is because most investors are driven by emotions which come from their personality traits, and it is not always possible to cast aside these traits of the investor completely.
3. The outcome of an investment decision depends on the product’s performance as
well as the temperament of the investor, hence one should ideally choose products that suit one's temperament.
4. It is possible that of two people with the same job, coming from a similar family background and with similar upbringing, one cannot withstand volatility while the other can negotiate it well.
5. It is, therefore, better that the first person builds a portfolio with investment products that is less volatile in nature while the second person who can withstand volatility can have a portfolio with products that can show relatively higher levels of volatility and also risks.
6. In the long run, the outcomes of the two portfolios, in all likelihood, will be very different and it is highly possible that, while the portfolio with less volatility will give returns which will be good, the second one may give some spectacular returns.
7. The temperament is reflected by a person’s ability to ride the course without being distracted by noises around him, event flows, etc.
8. Part of a person’s temperament is also about his investment decisions’ conviction, and also about the person’s conviction to go against the herd mentality, which shows the person’s conviction with regard to his ideas and reflects his temperament.
9. When investment decisions are made by following what others are doing, that too reflects the personality of the investor, but this herd mentality is something that investors should avoid.
10. It is also often seen that rather than trying to tell investors that they should make investment decisions based on logic, those who are selling investment products sell the ones which are in vogue by giving what the clients want but not what they need, which could have serious long-term repercussions.
2. This is because most investors are driven by emotions which come from their personality traits, and it is not always possible to cast aside these traits of the investor completely.
3. The outcome of an investment decision depends on the product’s performance as
well as the temperament of the investor, hence one should ideally choose products that suit one's temperament.
4. It is possible that of two people with the same job, coming from a similar family background and with similar upbringing, one cannot withstand volatility while the other can negotiate it well.
5. It is, therefore, better that the first person builds a portfolio with investment products that is less volatile in nature while the second person who can withstand volatility can have a portfolio with products that can show relatively higher levels of volatility and also risks.
6. In the long run, the outcomes of the two portfolios, in all likelihood, will be very different and it is highly possible that, while the portfolio with less volatility will give returns which will be good, the second one may give some spectacular returns.
7. The temperament is reflected by a person’s ability to ride the course without being distracted by noises around him, event flows, etc.
8. Part of a person’s temperament is also about his investment decisions’ conviction, and also about the person’s conviction to go against the herd mentality, which shows the person’s conviction with regard to his ideas and reflects his temperament.
9. When investment decisions are made by following what others are doing, that too reflects the personality of the investor, but this herd mentality is something that investors should avoid.
10. It is also often seen that rather than trying to tell investors that they should make investment decisions based on logic, those who are selling investment products sell the ones which are in vogue by giving what the clients want but not what they need, which could have serious long-term repercussions.