The latest AMFI data shows that many investors have exited their equity fund holdings after witnessing a sharp rally in the market. One possible reason for this temptation to book profits right away is that holding on to the investments for the future is an abstract one.
In fact, it is human nature to separate ourselves from future self. So, saving for future feels like giving money away to a stranger rather than giving it to ourselves.
One way to overcome this problem is to help clients imagine their future more vividly. It can be as simple as writing a letter to their future self. They could write anything like prepaying for a luxurious holiday in Sweden or following the passion of playing golf at 65. The idea is to help clients become emotionally invested in their older selves.
Another way to inculcate long term investment discipline is to set up a specific calendar date to achieve a financial goal. Clients are more likely to save for retirement that happens on ‘December 10, 2040’ than for the one that happens ‘in twenty years’. This simple change can make the future more concrete and real.
Do try these tips and let us know how they work out for you!
