“What makes the desert beautiful is that somewhere it hides a well.”
Investors mostly believe that wealth is created through better performance of financial instruments. Therefore, when instruments fail to deliver, investors take the easy way of blaming the instrument. Faulting the manager is another common response. Investors mostly overlook the behavioral aspects. Wealth creation has become an increasingly Behavioral phenomenon in recent years. Behavior plays a greater role in deciding wealth outcomes and assets are acting as vehicles driven by investor behavior. Investor behavior in recent years have been greatly prejudiced by volatility. Investors mostly head towards assets where volatility is positively distorting prices. If the prices go down, they simply press the exit button. Clearly, there is a serious need for investors to behaviorally alter their response to volatility. Volatility cuts both ways. Investor behavior must realign to sidestep volatility rather than to swing with its ways. The bet has to clearly move beyond volatility.