If you are an investor have you ever postponed an investment decision? If you are an investment advisor have you ‘suffered’ the indecision of a client? Has a client tested your patience? Have you wondered why this happens? Let us look at some of the reasons as to why people are not able to close some deals even after they tell you hey have made up their minds:
- Fear / Greed - Fear that the US market will fall or that the Indian market will do better than the US market! Imagine for those who are investing in different markets and different instruments, they are unable to decide whether to Invest and in which market.
The typical response is “market is too high” or “market is likely to fall” - very difficult to say how much is fear, and how much is Greed! So if the market is at 53,000 (Sensex) - they will find it difficult to make up their mind. It does not matter if the market goes to 39000, will they invest? Take a Guess.
- Too much choice - When people go to a Paratha shop with 130 types of Parathas, they go through the whole list and then order ‘Aloo Paratha’. Similarly when you tell the prospective investor he can invest in Debt, Equity, Arbitrage, International debt, International equity, - and offer him/her 14 choices, the investor is lost. You have lost him in the 3rd fund offer itself. Decision making is stressful, so the brain switches off.
- The Proverbial Brother- In-Law! When an investor gets stressed he says “I will ask my..xyz” - it could be wife, brother in law, banker, insurance agent, boss - take your pick. He may be using this as an excuse to get rid of the adviser at that point in time. That is all.
What are the solutions?
If you are a person who finds it difficult to make decisions, sit with your spouse (friend, parent, sibling, child - almost anybody) and go through all your investments. The best investments may already be there. Just add more money to one of the investments. There may be no need to buy any new instrument. If you have Rs 3 lakh in one fund, adding another Rs 45000 to the same fund may not be a bad idea.
If you are an investment consultant - give the investor lesser choice. Just offer Fund A or Fund B - with Fund C as a back up. That is all. If you show 23 funds, the investor is bound to be fatigued and not in a position to answer.
Sometimes it helps if you can show “what have you missed”if she had invested Rs 4 lakh in March 2020, it would have become say Rs 7.5 lakh today ! When you send such a message it has a good impact on a person for whom this amount is material. However if he/she has a net worth in crores, this example may not cut much ice. Decision making is not easy. Many people struggle with it, and one way to improve is by minimising the number of decisions that one has to make.
What have I done? Well I wear only white shirts and black pants for meetings. All my bills are automated for payments. My insurance payments, tax payments are made on the day I get a call for the payment. My investments happen through a SET of SIPs.When you reduce the number of decisions, your stress goes down and you have freedom and time to make slightly more complex decisions.
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’