Avalanche Effect Focus On Information, Action 

Investors must sift from the info avalanche to home in on the right decision.

We all have our personal fi­nance and investments to man. age, and with that at the back of our mind, we take in informa­tion that is relevant for our pur­poses, or we think is relevant.

Especially in today’s age, we receive a plethora of informa­tion. It comes through new spapers. television channels ‘breaking news’ various apps on our mobile phones, social media. people we meet or talk to and the like. The fast pace of and multifarious sources of in formation available to its Is a be­nefit bestowed by technology.

When a filter is key

However, the overdose also means that we have to apply a filter somewhere. Applying a fil­ter does not mean we have to close ourselves to the benefit that technology is bringing to us; we have to keep our eyes and ears open. Rut, there is a b. mit to which we can retain data, process it and apply it usefully. Unless you are a fund manager,

analyst or other professional as­sociated with finance or invest­ments, you have limited time and criergy bandwidth (or data relevant for your investments. You have to decide which da­ta points are relevant for you. and hence declutter your mind space. Data becomes useful in formation only when you put it to productive use. To make sense of the various financial data hitting us. let us bucket these into categories.

One is information that comes every day e.g. Nifty and Sensor movement. 10-year go­vernment security yields and oil price movement. Next, events that happen from time to time in the market. economy, governments and corporates. Then, there arc views and opi­nions voiced by experts and so­metimes. non.experts. in 171e­dia. The other bucket of data Is where you gel to receive deeper or an pieces of informa.

non. such as company balance sheets, corporate earnings growth and the government’s fiscal situation. The other as­pect to consider for bucketing data into relevant and not-so­relevant is your set of goals. Assuming you are not a fi­nance professional. it all comes down to (a) whether you are do­ing the analysis yourself (DIY) or have given it to a profession­al fund manager such as a mu toad fund or PAS (b) whether you are taking inputs from a professional adviser (c) how much unit, and bandwidth you have for tracking and analysing the data and (d) to what extent or depth you want to analyse. If your funds are managed by a professional or if you are or advised by one, you need to track only the broad develop­ments just to be aware which way the economy and market is going and you are In a position to understand the background

of the advice and ask the right questions of your adviser.

Next come data points. There are events that happen from time to time. These are not In your control, what is. is your portfolio. While you ale sorb all the news, your perspec­tive should be whether it is so significant to warrant a change in your Investments or does it sere as another point of aware ness. It is not about the ‘hea­dline’ which is designed to make it sound earth shattering. but about the real import.

Relevance to context

As an illustration of the data and discussion pouus men­tioned above, till March 2020. the fashionable point of discus­sion was economic slowdown. In a simple and real sense, eco­nomic slowdown refers to the economy slowing down. Even then, CAW growth rate was pos­itive, only that the growth rate

was slower than ember. In the quarter ended June 2020, GDP actually contracted Significant. ly i.e. it was a slowdown in the real sense. It was not slower growth, it was a shrinkage of the actual economy. Hinvever, between April and June 2020. too few discussed the slow­down as the experts changed their priority to the medical emergency and how to manage the pandemic better.

Even If you had soaked in the intellectualization of the ‘slow­down till March 2020, apart from engaging discussions and viewpoints, how did it impact your investment portfolio? There would have been im­pact, but as an action point on your part, it would have been li­mited to minor tweaks in the portfolio. If your money is with mutual funds, or you are taking inputs from a professional adviser, they would be doing the tweaks anyway, based on their
reading of the situation. Net-net, when you come across the multiple data points. events and opinions, initially approach it with an open mind. but then apply filters. The first filter is. whether it is relevant or not. If not, do not burden your head with it. That is noise. If relevant, question whether it only raises awareness or helps raise queries to your ad­viser. This is useful informa­tion. If there is some truly sig• nific.mt development. it may impact your investment portfolio. ho and may be a call to action. However, such develop­ments do not occur so frequent­ly that you have to tweak your port folio every day. Your invest – menu are for the long term and some event or the other will happen every day. For your dai­ly purposes, you have to choose data points that will populate your indicator panel. While driving, you can only focus on so much and you change course when the event is a key one.


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