Invisible Gorilla is telling you how to invest, are you listening?
Let me tell you about the Invisible Gorilla Experiment, in the invisible Gorilla experiment, a bunch of 5-6 people are there in the room and a ball is being passed around them in any sequence or order. You are required to watch the video carefully and tell how many passes are being made amidst the participants. So while you are busy watching the passes that are happening among the participants, a gorilla walks in to the middle to the room and beats its chest and walks out of the room while the sharing of the ball is still in progress.
(Check you tube for the Invisible Gorilla Experiment https://www.youtube.com/watch?v=vJG698U2Mvo )
After the event was done , the participants were asked if they saw anything extraordinary while counting the passes. Up to 50 % of the participants in the original experiments never saw the Gorilla at all. In fact when I was offered this test before I knew this.. neither did I see the gorilla.
Turns out that when we are deeply focused on one action, we miss out on all the action that happens out of our focus area. It is virtually impossible to keep tabs on everything simultaneously.
In our daily life too, we are all caught up in our own points of view based on the inputs and views fed to us by media experts and the news that is flowing to us. When we are caught in this pattern of news flow, it is almost impossible to see that there is an alternative that has walked in (Gorilla) and is actually quite apparent, but we have missed it because we were focused on other stuff and also because we did not want to see it.
In the investment parlance, this can mean a lot of lost opportunities and losses. Example during the last few weeks everybody has been talking about how much Gold has generated in terms of returns, so the focus was on how to move investments into Gold to benefit from the heightened risk and benefit from the near term uncertainty. However unseen to us the last one month Mid-cap & Small Cap indices have grown by 11% and 17% respective, just one month. So if you have been caught up with the flow of news and decided to move from Small cap Funds into gold Funds, you have lost the potential gains in Small cap as also the waning returns in Gold hasn’t done you any good either.
Especially in investing it is impossible to get the short term trend exactly correct, it is therefore important to stay invested in a diversified portfolio and stick with the original plan of action as suited to your risk appetite and financial goals. Trying to catch the winners could be difficult and also lead to over all loss in your portfolio.
So the takeaway is to keep looking for the invisible Gorilla but also stay reasonably diversified to ensure that the portfolio is not skewed to one trend thereby leading to a loss.
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