Power of Behavioral Finance! Save more for tomorrow, not tomorrow!

Chintan Radia

CONTENTS

Introduction to behavioral finance

Challenges with personal finance

Open Discussion

Investment instrument available in India

Q & A

BEHAVIORAL FINANCE What is it? Why it’s important? Long term impact?

INTRODUCTION TO BEHAVIORAL FINANCE

In the complex environment, behavioural finance comes

as an antidote to investor anxiety and guide to safe

investments

It’s an understanding of behavioural and cognitive

phycology and decision making process and helps us

understand why people make irrational decisions.

It’s not a technique, it’s a human phycology.

HUMAN BEHAVIOR

Lets take two situation :

Situation 1:

a) A sure gain of Rs. 2000

b) 25% chance to gain Rs. 4000 and 75% chance to gain nothing

Situation 2:

a) A sure loss of Rs. 2000

b) 75 % chance to lose Rs. 4000 and 25% chance to lose

nothing.

HUMAN BEHAVIOR

Happiness of earning is less than compared to pain of

loss.

People tend to become more optimistic when markets go

up and more pessimistic when markets go down

Investors are risk hesitant when chasing gains but

becomes risk lovers when trying to avoid loss.

CHALLENGES WITH PERSONAL FINANCE

CHALLENGES

Lack of Time

Lack of knowledge

Fear of loss

Bad past experience

Hard times is the best time to

invest!

OPEN QUESTION

Are we giving enough time to personal finance ?

OPEN QUESTION

Are you a disciplined investor ?

OPEN QUESTION

Why people tend to spend more then what they earn?

OPEN QUESTION

Why it's important to start with small savings right

from the day you start earning?

SO HOW TO MASTER YOUR MONEY?

MASTER YOUR MONEY

Start saving from the day you start earning. DON’T wait for

right time!

Amount of money you spend should be less then amount of

investments you make.

Don’t ever go by market news and hot tips if you are a long

term investor.

Give enough time to personal finance.

MASTER YOUR MONEY

Plan your saving instead of planning your spending.

Think of one thing that you can give up for next 2 years.

Invest that money for next 2 years.

Investments should be regular through out the year not

just to save tax while filing IT returns.

FINANCIAL INSTRUMENTS

INVESTMENT INSTRUMENTS

Stock

Market

Mutual

Funds

Bonds

Fix

Deposit

Gold

Real

Estate

PF , PPF

HISTORIC DATA OF STOCK MARKETS

STORY OF WIPRO

HISTORY OF MUTUAL FUND RETURNS

HISTORY OF SIP RETURNS

HISTORY OF ASSET CLASS RETURNS

HOW TO MAKE RIGHT DECISION

HOW TO MAKE RIGHT DECISIONS

Understand your current financial situation

Set goal of what you want to achieve in next few years

(long term & short term)

Be a disciplined investor

HOW TO MAKE RIGHT DECISIONS

Don’t ever go by tips and recent trends. Always look at

the fundamentals and historic returns.

Diversify your portfolio.

Think big!

When other are greedy be fearful and when others are fearful be greedy.

THANKS!