Edelweiss Wealth: Mind Over Money: Edelweiss Wealth’s Rahul Jain decodes the traits of an effective trader and investor

In an interview with ETMarkets, Jain, who has over 14 years of professional wealth management experience, said, “Trading requires discipline, which is the most important thing. Look at the short term and understand the psychology of the markets. Edited excerpts:

How effective are Telegram or Facebook channels when it comes to so-called unbiased “advice”? SEBI has harshly criticized these groups. But why do investors instantly believe something on hearsay?

I would say rather than looking at the effectiveness of Telegram channels etc., we should be more careful to understand who is running those channels or providing content on them.

If it is well-registered AEs and companies with many references, it can be useful for people, otherwise a lot of fake information, wrong information, etc. can also occur.

It is therefore essential to know the identification information of the subscribers.

But this is nothing new from an investor’s point of view. People always act on someone’s advice, whether it’s your friend, a family acquaintance, etc. for reconfirmation, but now, since advice taking channels have evolved, they have also evolved, but the behavior is very similar.

Moreover, it is also a herd mentality. Investing in stocks takes effort, but we just want to take the easy route which might not be very good and then it becomes like confirmation bias again.

How is behavioral finance different for traders and for long-term investors?

The approach to trading and investing is different in my opinion.

The skills required are a bit different:

Trading requires discipline which is the most important thing. Look at the short term and understand the psychology of the markets.

Investing requires a forward-looking perspective, long-term thinking and a good study of fundamentals.

Trading is understanding the psychology of the markets and investing is understanding the philosophy.

How can one overcome these biases and become more effective in investing and trading?

Investors can overcome these biases by following these simple steps:

• Be disciplined

• Be logical in your thinking

• Understand your financial situation, your appetite for risk

• Manage your emotions, and

• Get help from a financial advisor

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts belong to them. These do not represent the views of Economic Times)


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