iconimg Tuesday, September 01, 2015

Dhirendra Kumar, Hindustan Times
April 14, 2014
Last week, I read about the findings of the annual global survey of investor sentiment that Franklin Templeton Mutual Fund does. While much of the survey results were interesting, giving an understanding of how investor sentiment is still getting impacted by global financial crisis of 2008, a couple of findings especially caught my eye.

One, it seems that a considerable number of equity investors do not have the correct idea about how the equity markets in their country did during the year past. In this survey, some 77% of the investors were from markets that generated positive returns. However, when asked whether their market had had a positive year, only 55% thought so!

This is too large a number to be a fluke. It does seem that a lot of investors operate in a sort of an information fog.

People’s perception of how things have been are probably coloured by a lot of things.

These could be how their own investments have done, or even how their own investments have done compared to what they expected. I’ve personally observed all these. The markets go up 30% one year and investors step in and invest.

Now, they go up 20%. That’s taken as a disappointment by investors, and gives rise to the perception that the markets are not doing well.

It seems that perception and feelings will gain the upper hand over hard numbers any day.

Among investors of 22 countries that were surveyed, Indians stood out as the most optimistic. Whether it was their estimation of how the equity markets would do or even whether they would meet their financial goals, we are the most optimistic in the world.
I guess this is good news. After all, optimistic people are more likely to try out things and more likely to succeed. I’m not sure whether this makes sense in investments, but perhaps at some level we know that there is no alternative.