The Hindu Business Line : It’s not total recall

One of my friends joined as a lead software architect in a boutique firm last year. He was in charge of their largest client, until last month. Something went wrong with the account for which my friend claims he was not the reason. The point is not that. His annual performance review was due last month. And his supervisor could only recall the mistake my friend did just that week, not the additional billings that he generated in 11 months! So, my friend did not get a salary hike and promotion. Perhaps, you have experienced it as well. Why does this happen?

Psychologists claim that our memory is typically geared to remember only the final episodes of any event. Think of the film you like the most. You, perhaps, liked the movie because of the way it ended.

The final episode

Researchers have conducted several experiments to prove the point. In one such experiment, students had to rate the quality of life of two women who had died recently. One had an exceptionally good lifestyle till age 60 and then slumped into merely satisfactory life for the next five years after which she died. The second woman had a good lifestyle till her death at age 55. The students gave the second woman a better lifestyle rating than the first, even though the former had more number of years of exceptionally good lifestyle. Why? The students preferred the final episode to the total movie called life.

Learning the hard way

It is the same with investments. Suppose you had entered the market for the first time in 2003. You may have generated handsome profits until mid-January 2008 when the market crashed. The final episode would have stuck in your mind. So, did you immediately take a vow not to enter the market again?

While you cannot control how the market behaves, you certainly can ensure that everything goes well in the month leading to your annual performance review. My friend learnt the hard way on what it means to have it otherwise. You need not.

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

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