90% investors are aware that behavioural biases can impact returns

Investors often make decisions based on emotions, not logic. Such behavioural biases often can lead to decisions resulting in sub optimal results.

Behavioural experts feel that the first step for any investor to overcome their biases is to accept and admit that they have certain behavioural biases and blind spots. For instance, if an investor knows that he is suffering from a behavioural bias say ‘Anchoring bias’ (Relying too much on a piece of information when making decisions), he will be in a better position to deal with it as compared to someone who is not aware of this.

In this regard, outcomes of two surveys by Cafemutual augur well for the MF industry. One of the surveys asked investors if they sense a tug-of-war between their analytical brain and emotions while investing. The survey generated responses from 1452 investors from across the country who attended Cafemutual Confluence 2020 Investment Marathon.   856 or 59% investors voted that they feel a tug-of-war between their analytical brain and emotions while 408 or 28% investors said they do not sense any such dilemma and 188 or 13% investors said they were unsure.

Q. When it comes to investing, do you sense a tug-of-war between your analytical brain and emotions?

Another survey shows that investors are aware of the fact that their emotions can weigh on their investment decision outcome. 1187 investors participated in the survey that asked if they think their behaviour can impact their investment returns. Nearly 90% or 1074 participants agreed that their behaviour could affect their financial journey, while 6% or 71 investors maintained that their behaviour has nothing to do with returns. The remaining 4% or 42 investors said that they are not aware of any biases to make an opinion.

Q. Do you think your behavior can impact investment returns?