Today morning I got an interesting mail from “Behavior Gap” about how the familiarity will actually work in your investment too. So thought to share this wonderful information with you all.
Let us say you have a choice of selecting between a shirt which have best quality cloth, stitching and colour of your choice but without any brand name and a same quality cloth, stitching and colour bearing branded shirt. Which one you choose? To this situation there are two aspects-Person who looks at money will definitely will go with unbranded shirt. At the same time the person who is looking at status or risk averse will blindly follow the branded.
According to the recent study conducted by “Booth School of Business at the University of Chicago” on the above said situation but with different example (Generic Drugs Vs Branded Drugs) majority will be towards branded than unbranded. When they asked the reasons behind selecting branded drugs, they found some interesting answers like a man saying he will look cheap to his wife, a woman saying brand of that particular drug resembles her grandmother and a man selected the branded as he don’t find time to differentiate.
The same is true with our financial decisions. Because we know that Insurance product we are actually looking to buy is not available with the familiar insurance company or agent, but we still chose the same company products again and again. We manage the same old bank account even though we know that there is another bank which is offering us the better option in terms of interest rate, online platform or service. We know that there are few funds which are well performing than what we have, but we still continue with the same funds. We also know that the agent with whom we have financial deals since long is actually not giving us any value addition or wonderful guidance, but we simply follow the footsteps of that agent.
The final result will be plenty of insurance products from the same agent or insurer which are of no value addition to your financial goals, not gaining the full value for your money from your banker, plenty of funds from the same mutual fund company.
What we can say in this state? Is it just lethargy to act or habit of being within our comfort zone of investment? In my view it includes both when I found such inertia of people’s style of being with their money. Always being one’s own comfort zone and sticking to your old decisions may sometime not give you any fruitful results. So act immediately when you find something is going wrong with your financial decisions.
Hope this post will activate readers from their lethargy 🙂