The Hindu Business Line : What makes you happy?

For nearly three years, a friend of ours was routing to set up his own consultancy. One reason for his dream-goal was his belief that he would be more happy on his own than if he continued to work for his employer.

A few days ago, we happened to meet him. It is now more than three months since he started his firm. But his face did not radiate the kind of happiness we thought it should. On further inquiry, we found that he was unsure if being on his own was a happy event in his life! You may think that our friend is a confused person — unsure of what he wants in life.

If you step back and take a hard look at yourself, you are no different. None of us are sure as to what makes us happy! If that statement shocks you, do not be. Studies in neurofinance call this effect the “Impact Bias”. What does that mean?

Not long-lasting

It refers to the errors we make in estimating the event that will make us happy and the duration for which we will be happy. Suppose you long to own a Mercedes. You work hard for two years and finally buy your dream car. Your excitement is at its peak as you park the car on your driveway for the first time.

A week later, the Mercedes becomes part of your life. And you now look for something else that will make you happy. You thought owning a Mercedes was most happy thing in your life and that the happiness would last for long. You were wrong. That is the Impact Bias.

The flip side is also true. Just as a positive event may not make you happy, a negative event may not affect you badly.

A loss in the stock market, for instance, will not affect you as much as you think it would. So, if you are not trading in the market now for fear of losing, remember the Impact Bias and buck-up and start trading!

(The author is a Chennai-based investment strategist.)

More Stories on : Stock Markets | Simple Economics

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page