“Risk hai to ishq hai”- Decoding the financial risks and how to stay safe!

A couple of months back we had a 20-year-old boy come to us in our outpatient department who was feeling very distressed, had difficulty sleeping and remained very anxious for the last week. When we interviewed him, we got to know that he had lost Rs 40,000 in 2 days of intraday trading. If this wasn’t stressful enough, he told us later that this money belonged to his mother and he had not even informed her about it. This situation caused him great anxiety due to his fear of the consequences.

There was another young man who lost a lot of money by via of copy trading app. He told us how he had blindly believed the advertisements and just kept copying the moves of successful traders and ended up losing more than Rs 30000 in a month. These are not small numbers for a struggling middle-class family.

These are not rare, random stories. As aspirational young India moves from fixed deposits to stocks and mutual funds towards a new era of financial freedom, the generation gap is widening even more. Youngsters heavily influenced by the ‘influencers’ think that their strategy is the right way to go while parents feel safety is the key and this also creates a lot of conflicts at times in the household.

Many people are getting duped into lucrative schemes and are getting scammed by clicking on links promising huge sums of money for free. Countless people are falling for even more dangerous schemes in anticipation of a big, quick reward overnight. Nothing proves this more than this shocking statistic that India has more Dream11 users (12 crore) than the total number of Demat accounts (9 crore) opened in the last 15 years.

Dream11 is amongst the most successful fantasy sports companies operating in India, which again offers the temptation of big, quick rewards. Of course, while both- intraday trading and sports fantasy games are designed in a way that the user has to use his brain, the basic premise is that the majority of the users will end up with losses while only very few will ever win. Around 90% of Intraday traders lose money in trading. It’s not difficult to predict that the number is going to be similar with sports fantasy apps.

Risk hai to Ishq hai
Now you might be wondering if these things are so risky then why do people still go for it?

Well, ask this to a youngster and he will be quick to say, “Risk hai to Ishq hai!”, a famous dialogue from the critically acclaimed web series SCAM 1992 which is based on the life of tainted stockbroker Harshad Mehta. The way youngsters have become so fascinated with the stock market post the grand success of this web series deserves detailed research in itself.

“Risk hai to Ishq hai” in terms of learning theories of Psychology would be very much in line with the principle of variable positive reinforcement.

Reinforcement is what predicts our learning. When you do some action and you get a reward afterwards, this phenomenon is called positive reinforcement. For example, if you get a good rank in your exam and parents decide to gift you an iPhone. Positive reinforcement increases the chances of desired behaviour getting repeated more often.

But when you are not sure on which particular attempt you will get the positive reward that is an example of variable positive reinforcement. The elusive suspense of the variable reinforcement is much stronger than regular positive reinforcement. Research suggests that once the learning has occurred via variable positive reinforcement it is the most difficult to break. No wonder why gambling is considered to be one of the most addictive behaviours in the world! Also, other factors which come into play are the personality traits of the participants- impulsiveness, novelty seeking, low frustration tolerance and reward dependence which are all associated with increased risk taking, foolish investments and also increased chances of developing dependence on either substances or behaviours.

How can we stay away from falling into a habit of such financial risk-taking behaviors?
  • Do your own research. Don’t rely on the ‘tips’ to make your financial investments.
  • Always make sure that you are doing things a legal way or else be ready to lose your hard-earned money.
  • Understand that generating wealth takes time. Approach any scheme that promises big, quick bucks overnight as either a scam or something very, very risky. Don’t click potentially dangerous links that make unverified, tall claims about huge returns.
  • Have a financial advisor if you think you lack adequate knowledge in the field.
  • Don’t trust that influencer on social media who is just out there to make money out of paid promotions.
  • Always inform somebody closer to you- preferably your family member, about any scheme/asset you are investing in.
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