Fear of investing

You may be afraid of heights or snakes. And then you may be afraid of investing in risky assets – equity and commodity. Are such fears irrational? It is important to ask this question because irrational fear, perceived to pose danger to your financial or physical health can lead to anxiety, causing unnecessary stress. Besides, irrational fear can prevent you from achieving your life goals.

It’s in your genes

It turns out that evolutionary or unconditioned fear is good. Suppose you have a vegetable garden in your backyard.

You are watering your plants one evening and you spot a long object. You jump away from the object, thinking it is a snake. Later, you realise that the object was only a long rope!

You reaction was natural. Your body instinctively responded to the danger. Our cave-dwelling ancestors lived in the dark with predators around them. Survival was based on instinct. Our brain even today is, perhaps, shaped to support our physical existence. From a neurological perspective, the fear system in your brain triggers your physiological response. And your physical body calms down once your rational brain confirms that the long-winding object is not a threat but just a rope.

The issue arises because of modern-day complexities. We may not be in physical danger as our ancestors were. But the potential for conditioned fear has increased. Consider investing. You may have grown up in a household where your parents invested primarily in gold and real estate. And the reason they did so was because they lost heavily by investing in equity. The conditioned fear of equity in your household could have an unintentional effect on you. You will most likely fear equity investment as well! Such conditioned fear may not be rational.

Therapy, the solution

So, while evolutionary fear is good for your survival, conditioned fear need not be. Should you overcome such fear? If conditioned fear leads to continual anxiety and prevents you from achieving your life goals, you should take action to moderate, if not overcome, the fear. Conditioned fear, for instance, could prompt you to choose inappropriate investments. You could – conditioned by your fear of equity investments – choose gold, real estate and bank fixed deposits for your retirement portfolio. A portfolio without equity may be inappropriate. How should you overcome your conditioned fear? You should undergo financial therapy. This is a process where an investment adviser acts as your behavioural coach and helps you moderate your conditioned fear.

The objective is to help you take appropriate investment decisions.

Overcome conditioned fear, which might prompt you to choose inappropriate investments.

(The author is the founder of Navera Consulting. Feedback may be sent to >knowledge@thehindu.co.in )

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