Avoid Anchoring.
If you visit Kerala during monsoon season ,you can find many hawkers from North India selling blankets and sweaters.They come in groups and sell their stock door to door.They follow a unique selling strategy.
First Some of them will go to the villages and quote shockingly high prices for their products.They wont reduce their price and will not be able to sell much.
After a few days another group will come. They will move down the price and convince villagers that they are selling at a discount because the season is over and they have to go back to their native places.People think this high price as bargain comparing with the old price and happily buy out.This behaviour is called Anchoring in behavioral finance.
Investors are anchoring when they buy a stock that has fallen 50 percent without a second thought. They are mentally anchored in the price it was trading before the crash. That makes the present price look like a bargain.
Be Careful,Some of them will take months to reach those earlier highs and many of them will never see those highs.
Anchoring is injurious to your financial health.
If you visit Kerala during monsoon season ,you can find many hawkers from North India selling blankets and sweaters.They come in groups and sell their stock door to door.They follow a unique selling strategy.
First Some of them will go to the villages and quote shockingly high prices for their products.They wont reduce their price and will not be able to sell much.
After a few days another group will come. They will move down the price and convince villagers that they are selling at a discount because the season is over and they have to go back to their native places.People think this high price as bargain comparing with the old price and happily buy out.This behaviour is called Anchoring in behavioral finance.
Investors are anchoring when they buy a stock that has fallen 50 percent without a second thought. They are mentally anchored in the price it was trading before the crash. That makes the present price look like a bargain.
Be Careful,Some of them will take months to reach those earlier highs and many of them will never see those highs.
Anchoring is injurious to your financial health.
