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Impact of Emotions on Investing

Posted On Friday, May 11, 2018

Many a time you will hear advice along the lines of “Emotions have no place in investment”. Easier said than done! We are all human and emotions are as much a part of us as the rational side. Investing is emotional; after all it’s your hard-earned savings. Managing your emotions when investing is such an important concept that the field of behavioral economics has dominated the investing conversation in recent years.

Plenty of noise and jargon gets tossed around out there that can tempt or scare even the most steadfast of us. It becomes so difficult to decide what to do that we can become paralyzed by all the potential options. “Should I sell? The headlines are bad and it could go down further!” “Should I stay put or even buy more? People always say buy the dips!” “But this dip could last so much longer!” With all that in mind, we thought we’d share a few tips on how to react when the markets are volatile as they have been so far this year.

To get these tips we spoke to Mr. Atul Kumar, the Head of Equity Funds for Quantum AMC, as to what his views are on staying a course when the markets and investors demand otherwise. As you may be aware, Atul manages the Quantum Long Term Equity Value Fund, a fund that since its inception in 2006has stayed true to the principles of Value Investing, through good times and bad (and we’ve had our fair share of both!).

Fight or Flight?

If you see your portfolio balance dip during periods of market volatility, you may want to fight on due to your conviction (or that of your friendly neighborhood advisor) and buy more of that winning stock tip you got, or you may feel the urge to flee the market and head for lower-risk investments. Whichever way you react, you could miss out on the worst trading days, but you may also miss out on the best ones. In many cases, timing the market for reentry simply results in buying high and selling low.

Atul’s response to this is that “The best way to overcome this is to start your investments with a Systematic Investment Plan or an SIP, which allows you to stay invested irrespective of market conditions.”

Some Quick Tips To Keep In Mind

Instead of letting your emotions take over, try responding on an intellectual level. The tips below can help you maintain perspective when making investment choices so you can keep your portfolio on track for the long run. This is a tough thing to do as we may not always be able to stay the course.

Start with a Financial Plan

"If you do not have one already, start today" urges Atul. Create a financial plan that includes:

• Your financial objectives

• The time by when you wish to achieve those objectives

• How much—and how often—you will contribute to your portfolio. This will help you determine the amount of the SIP.

• A budget that factors in current assets and debts, as well as any known future income sources and expenses.

• A careful consideration of all these factors will lead you to an ideal asset allocation that you can spread amongst Equity, Debt and Gold.

“A financial plan is a blueprint that is designed to give you the best chance for investing success,” says Atul. “Putting time and effort into your plan initially can benefit you over the long term and help you get that much closer to your financial goal, so that you can face that goal with confidence and not trepidation.”

“What is in the headlines right now may make it feel difficult, at times, to stay the course,” adds Kumar. “But keep in mind that although the headlines have changed, it’s likely that, like us, your investment objectives of doing only what is best for you and staying true to a carefully laid out investment process and philosophy, haven’t.”

See the big picture

Focus on the progress of your entire portfolio over time, not on the ups and downs of individual investments. This may be easier said than done, as we are prone to listening to the noise out there. It’s almost impossible not to – there are high-decibel news channels constantly bombarding you with information on which is stock is hot and which is not. But if your goal is, say, planning for a retirement that is a decade or more down the line, then how does XYZ stock going down 3% in a day really matter?

“As long as the equity fund you have invested in stays true to its investing principles you need not worry” says Atul. Have a check box in your mind. If you wish to make a change to your portfolio, then ask yourself: is that change driven by the market or by a change in your circumstances? If the market is the check box being ticked, then we would recommend you to take another long look at your portfolio and consider the impact that this change may have if your attempt at market timing is wrong (as it so often is). Remember – NOT doing anything is also an action!

Get support

Lastly, if you have a financial advisor, start there. A good financial advisor can act as an investing coach when you feel tempted to stray from your well-thought-out plan, providing valuable guidance. It can be very beneficial to gather input from someone who has studied or even lived through market cycles, as they can help keep your jittery nerves calm during periods of market stress.

Atul aptly concludes by noting that “Investing in the right stocks or the right equity funds is not easy. It is definitely emotional. You have your life’s savings at stake. Stay disciplined with the help of a Systematic Investment Plan or SIP and remember to stay committed to your financial goals.”

To know more on how we can help you formulate and stick to your financial plan with the help of mutual funds call us on 1800-209-3863 or Email

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Long Term Equity Value Fund

(An Open Ended Equity Scheme following a Value Investment Strategy)
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index
Quantum Long Term Equity Fund
Investors understand that their principal will be at Moderately High Risk
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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