My wife is not a value investor. She is an impulsive buyer. She is under the spell of American Marketing Whiz Kids and Psychologists. I have seen her a number of times going for shopping to malls. The shopping mall is a completely American invention which encourages useless and impulsive buying and plays on your natural tendency to be confused by choices. The Americans have done the best studies on human behaviour and the findings of their Nobel Laureates have been very well used by the advertising and marketing agencies to influence our minds.
Recently, my wife went shopping to buy a pair of jeans for herself, fortunately she still fits into them. But when she came back, not only had she purchased a pair of jeans but also some assorted tops and kurtas. I was perplexed. I just happened to ask her, “Darling, you went to buy a jeans, how come so many tops also?” Pat came her reply, “There was a sale going on and it was last three days before the stocks lasted.” I did not ask any further questions. I believe in Thomas Gray. If ignorance is bliss, ’tis folly to be wise. But I understood, it’s not her fault. It is the hubris of Americana Marketiana.
As, Munger who is the alter ego and dear friend of Buffett describes in his book Poor Charlie’s Almanack, the loss of something triggers baser human emotions in our brain. And perceived losses have similar effect. As soon as we feel that something will not be available after a few days, we rush to acquire it before we are deprived of it. For a rational human being, it should be of no concern whether the item is available today or will be available after 5 days. It is the end use which should matter. But the irrational human in us, goads us to take “stupid” financial decisions. (I hope my wife does not read it).
In buying financial products too we do the same mistake. I recently interacted with Harjeet Hansi, a smart Colonel awaiting a promotion to the rank of a Brigadier of the army. He was seeking some financial advice on Mutual Funds and then while discussing, he also told me about how he had recently paid for a membership of a Club and was now paying EMIs for it. I told him that he had become a victim of DSRS. He had been influenced by the spiel of the marketing kid who visited them. The sales executive told them that the discounts and special offer were going to close in the next 48 hours. Thus, Hansi used his credit card to pay and was now looking for a way out. I gave him some advice.
But I can see DSRS all around me. On ebay, on flipkart, in malls, in stock markets every where sellers try to use this psychological deficiency in our rational thought to make poor charlies out of us. (With all due respect and apologies to all gentlemen named Charlie)
Are Stock Markets a race against Time?
What should you do? Never try to ride a full bus. Wait for the next bus, may be after half an hour, to go peacefully to your destination, unless it is a life and death situation. Investments are never life and death situations. You can wait with your money for a few more days before you spend/invest it. Use your rational mind. Do not get carried away by a clock ticking away. You can always purchase the stock tomorrow.