CNN Central News & Network–ITDC India Epress/ITDC News Bhopal: Investing in the stock market can be challenging, especially when emotions and market trends often drive decisions rather than solid research. Investor behaviour plays a big role in shaping market movements, and sometimes these emotions lead to price changes that don’t reflect the intrinsic value of companies. These emotional reactions can cause mispricing in the market, creating opportunities for informed investors to buy undervalued stocks or sell overvalued ones. One fund that aims to take advantage of these market inefficiencies is the Bajaj Finserv Multi Cap Fund, which uses a contrarian investing strategy. The New Fund Offer period for this scheme began on Thursday, February 6, 2025, and will end on Thursday, February 20, 2025.
Understanding investor biases in the market
Investor biases are mental shortcuts that can lead people to make poor decisions based on emotions rather than facts. Here are some common biases that can affect the market:
Herd mentality: This happens when investors follow what everyone else is doing. People might buy or sell stocks simply because others are doing the same, even if there’s no solid reason for it. This can lead to stocks being overbought or oversold, creating an opportunity for investors who are paying attention.
Recency bias: Investors sometimes focus too much on recent events and ignore long-term trends. For example, if a stock has done well recently, people may assume it will continue to rise, ignoring any risks.
Overreaction: During times of fear or panic, investors often sell off stocks too quickly, pushing prices down. On the other hand, when the market is overly optimistic, stocks may become overvalued. Both of these situations can create opportunities for investors who are not swayed by short-term emotions.
The Contrarian Approach
The Bajaj Finserv Multi Cap Fund is an equity fund that aims to take advantage of these market biases through its contrarian investing approach. Contrarian investing means going against the trend – buying stocks when others are selling and selling when others are buying. While this approach may seem unusual, it can help find opportunities in situations where the market has overreacted.
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