Go for a good blend of large- and multi-cap funds with robust long-term performance record. :: Business Line

I am 55 and work in a bank. My sons and I started SIPs for Rs 28,000 a month about a year ago in 14 funds, all through auto debit (ECS) system. The funds and sums invested therein are as follows:

HDFC Midcap Opportunities Rs 3,000, HDFC Top 200 Rs 3,000, HDFC Equity Rs 3,000, Sundaram Select Midcap Rs 1,000, Quantum Long Term Equity Rs 4,000, Birla MNC Rs 4,000, Birla Dividend Yield Rs 1,000, UTI Dividend Yield Rs 1,000, UTI Opportunities Rs 2,000, Reliance Diversified Power Sector Rs 1,000, SBI Emerging Business Rs 1,000, ICICI Discovery Rs 1,000, IDFC Premier Equity Rs 2,000, and Franklin India Blue Chip Rs 1,000.

Our target is accumulating Rs 1 crore in 10 years. Please advise on selecting mutual funds with long-term track record and checking for duplication as well as for underperformers that may have to be weeded out. We are ready to take medium to high risk.

Ramachandran

RBI likely to hold interest rates, CRR: RBS survey ::ET

Canara Robeco Floating Rate Fund: Invest :: Business Line

How to persuade your brain to moderate risk :: Business Line

I read an article explaining a recent research in neuroscience on risk-taking. The research, according to the article, shows that risk-taking is a physiological, and not a cognitive activity. Such research in neuroscience can help you moderate your risk attitude. How?

RISK AND TRADERS

The study argues that testosterone levels and risk-taking are related. The researchers found that when the testosterone levels of traders were higher in the morning, profits that they generated for the rest of the day were higher than when the levels were lower.

But higher profits mean larger bets, which when they turn bad can result in large losses. So, one takeaway from this study is that you can moderate your risk attitude by reducing your trading capital when your testosterone levels increase.

Of course, this is useful to professional traders and not necessarily to those who self-manage their investments. In any case, you know that success makes you overconfident, which prompts you to take more risk. In behavioural finance, this attitude is called Overconfidence Bias. This research essentially gives you one of the several biological reasons that lead to Overconfidence Bias.

POSITIVE FEEDBACK LOOP

In another study, neuroscientists found that risk-seeking individuals have increased activity in their nucleus accumbens (NaCC), which is the brain’s reward pathway. At the same time, the individual’s brain is flooded with dopamine, a naturally-producing chemical that activates the brain’s pleasure centre.

The NaCC and the dopamine can cause a positive-feedback loop. That is, the surge in the dopamine can get you excited, prompting you to take more risk. And this can lead to increased activity in the NaCC if your bets are successful, causing a further surge in your dopamine level. The risk-seeking individuals, in contrast, have more activity in their insula- the part of the brain that is related to pain and anxiety.

Understanding the factors that drive your risk attitude can help scientists eventually offer products to moderate your risk behaviour. Till then, you can adopt a simple rule to moderate your risk attitude: Suppose you invest Rs 5 lakh for five years and expect to earn 12 per cent a year. If the investment gives you a gain of 25 per cent in one year, take profits above 12 per cent. Why?

You may have invested Rs 5 lakh to accumulate Rs 8.8 lakh at the end of 5 years. Only if you invest the initial capital along with the expected annual return can you achieve your investment goals. You should, therefore, take out only the additional profits and invest that amount in bonds. This way, you can moderate your physiological urge to take more risk.

NSE, BSE holiday list 2012

Sr. No.	Date	Day	Description
1	26-Jan-2012	Thursday	Republic Day
2	20-Feb-2012	Monday	Mahashivratri
3	08-Mar-2012	Thursday	Holi
4	05-Apr-2012	Thursday	Mahavir Jayanti
5	06-Apr-2012	Friday	Good Friday
6	01-May-2012	Tuesday	May Day
7	15-Aug-2012	Wednesday	Independence Day
8	20-Aug-2012	Monday	Ramzan Id
9	19-Sep-2012	Wednesday	Ganesh Chaturthi
10	02-Oct-2012	Tuesday	Gandhi Jayanti
11	24-Oct-2012	Wednesday	Dasara
12	13-Nov-2012	Tuesday	Laxmi Puja*
13	14-Nov-2012	Wednesday	Diwali-Balipratipada
14	28-Nov-2012	Wednesday	Gurunanak Jayanti
15	25-Dec-2012	Tuesday	Christmas

*Muhurat Trading will be conducted. Timings of Muhurat Trading shall be notified subsequently.

Traders bullish on futures contracts, fuel hopes of rally gaining momentum:: ET