Marilyn Luis
They say, “Ignorance is bliss” but try telling that to someone who just lost out on a lucrative deal of a lifetime or to a sick patient that is unaware of a new research that just might give him the cure to a lifelong disease.
Whatever perceptions we have of certain things, there always originate from somewhere and are mostly conveyed through dialogue. For example, a lady always used to trim the ends of her ham before putting it in the oven and her kid asked her one day why she did that and it was because her mother used to do it when she was a kid. It turns out her mother used to trim the edges off because her baking pan was small and the slab of meat couldn’t be fitted in.
So much for ignorance being bliss! It resulted in unnecessary work, wastage of resources and time.
To illustrate with another example, a baby elephant (we’ll call her Nelly) was once found in the forest, lost from the herd. She was taken to the neighbouring village and brought up in captivity, always tethered to a pole by rope. She persistently tried breaking away from the rope but to no avail and as time passed her attempts to break free grew feeble. However, she herself grew enormous in size and stature, unaware of how strong she had become and that now by just tugging at that same rope by which she was tethered, she could easily come away free. However, such new information was not available to her and in her mind (bound by the knowledge of her previous failed attempts) she believed it was impossible to break free.
Similarly, when we as investors have preconceived notions about what one asset class offers as opposed to another, say, fixed deposits offering guaranteed returns as opposed to equities offering uncertain returns we form notions about the former being more safe than the latter. However, there is ignorance at play here since full information isn’t available and notions are formed prematurely without the necessary investigation, so they are bound to be false for the most part.
If the bank goes bankrupt, you can still lose all your money in a fixed deposit (barring the insured Rs 1 lakh). While the person with the equity Investment may have his money intact and then some, in the form of a handsome return on said investment, some years hence.
Ignorance creates fear and the best way to dispel this fear is by investigating existing biases and information at hand. From an investor’s perspective, we could start questioning our partiality towards certain investments like fixed deposits as opposed to other investments like equity schemes. A starting point would be to separate fact from fiction.
