Anatomy Of Hope

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Anatomy Of Hope
Nidhi Sinha, Editor, Outlook Money
Nidhi Sinha - 30 December 2023

Hope is the thing with feathers -
That perches in the soul -
And sings the tune without the words -
And never stop - at all -

The power of hope that humanity can harness is fabled and is something that has been much talked about by philosophers, litterateurs and revolutionaries. The hope for a better tomorrow, the hope for freedom and rights, the hope for a favourable look from the beloved, the hope that we will succeed professionally, personally, financially, the hope that the New Year will bring happiness and prosperity.  Hope can have wings, like Emily Dickinson describes in her poem, and can be unbridled.

Hope is indeed something that has kept us going in the most difficult of circumstances. But when it becomes unrealistic, it can pose problems that can impede our everyday life decisions.

In an article, Unrealistic Optimism About Future Life Events, published in the Journal of Personality and Social Psychology, author Neil D. Weinstein, described his investigation on “the existence of an optimistic bias concerning many future life events”. As he predicted, his work showed that “people believe that negative events are less likely to happen to them than to others, and they believe that positive events are more likely to happen to them than to others.” So, people may not expect themselves to fall ill, but may find others more susceptible. At the same time, they see their own chances of success in a more positive light, even if reality indicates otherwise.

The theory eventually led to the concept of “optimism bias” and was later applied to describe investors’ behaviour, as it could lead people to take unwarranted risk and irrational decisions. For example, the decision to buy a lottery is often based on the hope or the optimism bias that there is a likelihood of winning, even when the odds may be stacked against that possibility. Similarly, when the stock market is doing well and people make profits, they tend to believe in their choices and base their future decisions on these, without rationally assessing them.

The year 2023 saw the Sensex touch and cross the 70,000 mark for the first time after waves of volatility all through the year. Volatility is intrinsic to the stock market, and the year 2024, the election year, is likely to be no different.

What can help investors navigate the market at any point would be to steer clear of optimism bias and look at their decisions from a more practical lens that is based on research and trends. This rationality must be derived not just by looking at the merits of the instruments chosen, but also by syncing the decisions to individual and family needs, aspirations and financial goals.

There is nothing wrong with harnessing hope for a better future. In fact, it can push us towards making decisions that can help give wings to our dreams. This New Year, temper your hopes with a bit of rationality, identify and get rid of biases consciously, and you would love the outcomes.

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