Philosophers say that the ability to tell and transfer stories is the factor which separates human beings form the animals. When story telling plays a crucial role in our lives it is no wonder if they take an important role in the investments as well. Analysts and strategists spend more time writing and talking about their ideas and recommendations rather than doing the analysis or executing calls. The task of storytelling in the field of investments is to explain, interpret, predict, persuade or guard. Stories about which of the investments will be performing well or which are the ones not performing well, in which direction is the market moving, what is the cheap or expensive share etc. these stories matter especially when the market is so volatile that the stories try to guard investors from making bad decisions. But it may be hard for the investors to determine which the good stories are, which the bad ones are and which actually the fairy tales are. There are stories which prevent irrational behavior, stories which explain the terms , stories that persuade and the ones which never change.
To begin with , a real story which needs to be told by every investment professional to their client.
As it is the adviser’s main task as the investors have tis strong tendency of letting emotions get in between their judgments and investments. Buying of shares at high level and selling it when the price hits low scared by the further reduction of prices, the investments leads to disappointment. Here the story telling plays the role of helping the client to fall into prey of the emotions.
Story telling also helps you weigh down all the possible opportunities and risks involved in making the informed decision. It also supports behavioral aspects too. Investment Is always fun if you know more about the company you are investing it and the story telling might help the clients to acknowledge that they are contributing for a better world when investing in sustainable assets. But it is also important to not to get confused these explaining stories with the worse kind.
“ Always keep thinking for yourself. In this case, I’ve always asked myself: How can undervalued stocks give superb returns if they’re still undervalued? You can guess how factor investing has performed in the last few years. I wouldn’t be surprised if the next storybook heroes will be found in illiquid assets, such as private debt and private equity, offered in a liquid solution. So, don’t believe in fairy tales, because if something seems too good to be true, it usually is,” Says the chief.
As discussed above investing is all about stories and this day its more than ever. If we talk about the advantages of having compelling stories, on the stock-specific level – companies performed very well and offer double-digit returns this year. And good story stocks for this year is nothing but the stories of COVID-19, related to pandemic for example remote work, online shopping and delivery services or renewable-energy stocks related to structural themes such as climate changes. As the pandemic surpasses there might be stock of sad stories taking over but the upper hand will be with the good stories stock itself.
“Investing in equities will give you lower returns than in the past, but these returns are still relatively attractive. To fully take advantage of these returns, storytelling is very important in order to avoid behavioural traps.” Is the best story told by Bob Homan , Chief investment officer, ING.