Attitude-3 (The Apprehensive Investors)

With the advent of ‘knowledge era’ and use of computers; the speed with which multitude of events started taking place, became difficult for the “Slow Movers” to keep pace with. This is mainly the period between 1995 to, say 2005.

Indians by nature and by tradition are “Slow, Steady and Conventional”. Especially the middle class, about whom we have discussed earlier, are/were happy to remain in their comfort zone. In the changed scenario, they were mostly in a thaw. They preferred to remain as spectators (and critics!) rather than choosing to become players. They were caught in a Catch – 22 like situation. While on one hand they couldn’t resist their temptation to “reach out and grab” the opportunities, but on the other hand, their inertia, sluggishness and lethargy stopped them from gaining the desired knowledge base to grab the opportunities.

This resulted into their ‘apprehensions’ in every move. And when apprehensions take over then the “psychology of E F G H” starts dominating your actions. Let’s see what this stands for :

E : Emotions
F : Fear
G : Greed
H : Hoping against hope.

When the above factors take over then the decisions, specially in financial matters, result into disasters. People became victims of ‘heresy’ and ‘false propaganda’. In the absence of educated financial advisors and ‘factual data analysis’; the investors depended more on their emotional instincts while making an investment.

Similarly, ‘fear element’ prevented them to think “out-of-the-box’. As a result, many opportunities were lost.

Quite often, greed became predominant while making an investment. Because of this, bad investments were made on false promises of getting abnormally high returns. Investors suffered heavily due to sheer greed.

Finally, hoping against hope. Many investors preferred to stay with bad investments because of a false notion that things will turn for the better. Superstition made them believe on their zodiac signs and planetary positions. Palmists and astrologers were consulted in place of financial advisors. Hoping against hope!!

BUT SOON, THE DARK CLOUDS STARTED CLEARING!

By this time, another generation of young people came to the forefront. They were better educated, more knowledgeable, adequately aware, inquisitive, energetic, aggressive, ambitious and upright. Learning from the experience of their elders, they started to critically analyze the products of investments. As a result, logic prevailed and replaced ‘E F G H’.

Government too became active in the financial sector. Because of many misappropriation of funds, public money got trapped into dubious investments resulting into heavy losses. The fraudsters took full advantage of the loopholes in the controls of investment sector and looted public money. An interesting analysis says that those affected most, suffered from E F G H syndrome.

For enforcing financial discipline, strict rules were laid down in banking, insurance, capital market, equity market, money transactions etc. For check and control, a number of gov’t departments were set-up who worked as ‘watchdogs’. Simultaneously, it was also felt that public in general, needed to be educated. By this time, a number of top ranking global investment and insurance companies had also stepped into our country due to globalization.

TILL NOW, WE HAD BEEN DISCUSSING ABOUT WHAT IS ATTITUDE AND THE FACTORS WHICH SHAPE THE ATTITUDE OF A MIDDLE CLASS INVESTOR. IN THE NEXT POST, WE WILL DISCUSS ABOUT THE EMERGING SOLUTIONS AND OPPORTUNITIES IN THIS FIELD.

TILL THEN, PLEASE SHARE YOUR PERSONAL EXPERIENCES ON THIS. I REQUEST YOU TO FORWARD THIS POST TO YOUR LIKE MINDED FRIENDS. I ALSO INVITE YOUR COMMENTS AND QUERIES, IF ANY.

BEST WISHES!

Attitude – 1 (Why & How of Investor’s Attitude)

       

Let’s first discuss how the attitude of a person is shaped. This is not only an important subject but also very interesting as well. I have tried to study and understand this from various authoritative sources and then I tried to correlate these theories with my personal experiences. The subject is too wide. After the basics, I would focus exclusively on Indian “Investor’s Attitude”.

In psychologyattitude is a psychological construct, a mental and emotional entity that characterizes a person. They are complex and an acquired state through experiences. It is an individual’s predisposed state of mind regarding a value and it is precipitated through a responsive expression toward a person, place, thing, or event (the attitude object) which in turn influences the individual’s thought and action.

The famous psychologist Carl Jung’s analysis and definitions, though stated long back, still appear practical and relevant. He says in simple terms that attitude is readiness of the psyche to act or react in a certain way. He has also very correctly defined some “dualities” in the one’s attitude. Such as

  1. Consciousness and unconsciousness.
  2. Extraversion and Introversion.
  3. Rational and Irrational. Rational is subdivided into thinking and feeling Irrational is subdivided into sensing and intuition.
  4. Individual and Social attitudes.

It’s important to understand the factors which lead to the formation of above attitudes.

Values: These are guiding principles in one’s life or goals that people strive to obtain.

Beliefs: These are cognitions about the world. Subjective probabilities that an object has a particular attribute or that an action will lead to a particular outcome. These can be false also.

Perceptions: Same as above.

Family: Family plays a significant role in the primary stage of attitudes held by individuals.

Society: Social culture, tradition, religion, language, customs etc influence a person’s attitude.

Financial Status: Salary, status, nature of work, work environment etc affect a person’s attitude.

Components of attitude. It’s important to note that the following components too influence one’s attitude. It is called the ABC Model.

Affective component: These are feelings or emotions linked to an attitude object. For example, many people are afraid/scared of spiders. This negative affective response is likely to cause a negative attitude towards spiders.

Behavioral component: These refer to past behaviors or experiences regarding an attitude object. People infer their attitudes from their previous actions.

Cognitive component: These are the beliefs, thoughts and attributes that one would associate with an object. Many times a person’s attitude might be based on the negative and positive attributes they associate with an object.

Additionally, there are also two measures which shape an individual’s attitude and behavior. These are:

Explicit measures: Attitudes at the conscious level those are deliberately formed and easy to self-report.

Implicit measures: Attitudes at an unconscious level those are involuntarily formed and mostly unknown to us.

Both of the above measures shape an individual’s behavior. It is generally observed that when the demands are steep and one feels stressed or distracted, the implicit attitudes are most likely to affect.

NOTE

Having revised the fundamentals of the factors which shape one’s attitude; next in Attitude – 2 we will discuss how the Indian investor’s attitude is shaped. This understanding is of significant importance to guide and deal with an average Indian investor.

 

 

 

 

 

WELCOME

Yes, Poonji Nivesh (पूँजी निवेश) in India had always been a serious domestic story in every section of society. India’s growth story and specially the emerging middle class, the youth power, the start -ups, the arrival of global multinationals in almost every sector; have made Poonji Nivesh an even more critical and serious issue for the Indian citizens.

In order to encash upon and give directions to this success story, AMC’s and Financial Institutions of India and abroad have established their strong network to cater to  the various needs of society.

For control and transparency, govt agencies and financial regulators have framed a set of laws to check and balance frauds and irregularities. And  these set of laws are naturally in accordance with international laws. Timely reviews and amendments are also made whenever felt necessary.

Multiple investment options to cater to various financial needs have been introduced. This has given rise to a new breed of professionals called Financial Advisors who are qualified and licensed to provide different types of financial and investment advisory services.

As a result of above factors, the story of Poonji Nivesh in India has become not only interesting but also a bit aggressive and complicated. पूँजी निवेश करना है यह तो पता है पर कहाँ, क्यों, कितना और कैसे यह एक गंभीर विषय बन गया है। Experts के समझाने के बावजूद…बात कुछ समझ में नहीं आती!?! 😇🤔

With my past experience in marketing and my close association with leading experts of this sector, I have identified few basic, interesting and important things related with the psychology of the (Indian) investors.

These are first hand observations which I am going to share in my subsequent posts. If you’re an investor yourself then you might identify yourself with any of the groups of my analysis or if you’re a professional in the field of Financial Advisory Services then my analysis will help you to better understand your target audience.

Till then Welcome once again and thank you very much for your interest.

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