Modern science has made tremendous strides. In today’s times, it is possible to have breakfast in India, lunch in Dubai, and dinner in Germany simply by flying to these places. Internet has become the new knowledge bank providing information about anything you need without going to a library. Despite all such advancements, we have some beliefs that are stuck in medieval times and that to me is baffling.
On May 9, 2016, gold sales went up by 15% across India and trading in Gold Exchange Traded Funds (ETF’s) went up by 14%. Gold stocks also went up by 7.3% on the same day. In Kerala, where every street corner is dotted with jewellery shops, gold sales went up by as high as 35%. It was Akshaya Tritiya on that day and it is believed that by buying gold on this auspicious day you please certain god(s) who reward you with prosperity.
It was not just the gold and jewellery traders who cashed in on the beliefs of auspiciousness or quest for prosperity. Supermarkets, car and housing finance companies and almost everyone who had something to sell found some reason to tell people why they should buy their products.
Akshaya Tritiya is a fantastic example of the great Indian superstition industry which may be worth several billion dollars. As the gold rush ended on Monday, Indians had consumed an estimated 25 tonnes of the metal in a single day and had pushed up the country’s trade deficit by US $ 17.7 billion.
Believe it or not superstition plays an important role on the psyche of an investor, and this is not restricted to India alone but a whole lot of other countries where wishful thinking supercedes logic. Take for example Turkish people believe that if you feel like scratching your left palm, you will soon get money; on the other hand, if your right palm is scratched, it will drive money away or you will spend some.
Another interesting superstition comes from Korea where dreams about a pig or a dragon is interpreted as a sign that you’ll have great luck with money that day. Upon having this dream, many Koreans will go buy a lottery ticket, or even sell the dream to the highest bidder. Imagine telling someone here about your piggy dreams and before you know it they will place in a home for the mentally retarded.
All these examples suggest that psychological biases do affect financial decision making. Furthermore, superstition is an important part of how people make sense of randomness and form strategies for dealing with risk.
Throughout history, people have believed that certain rituals, objects, or symbols can be used to influence their luck. But investments can’t be made purely by depending on luck. If that’s the case then you are gambling with your money. Many a times when we believe in things we don’t understand we fall prey to such practices. Informed investors rarely makes financial decisions they don’t comprehend.
Writing about superstition is like stirring a hornet’s nest, especially when you link it with financial decisions. If warren Buffet had only relied on an auspicious date and time to invest in a particular stock, he would not have been the richest investor alive today, instead it was his astute understanding of the market conditions and street-smart attitude that worked for him. Festivals, auspicious days and times will come and go but in the end your success can only be achieved by the degree of hard work you put in without waiting for a supernatural approval.
