Question

1. Expound on the behavioral versus the Strategic approaches to direct investment.

Answer 1

Behavioural approach to direct investment would be more focused towards following the emotional and the sentimental approach and not following of the fundamentals of the direct investment.

Strategic approach for the direct investment means that the investment are made after appropriately analysing various opportunities and finding out the intrinsic valuations based upon the fundamentals of the company and then deciding upon whether to invest into the companies or not depending upon various factors.

Behavioral biases should always be ignored while making an investment decision because these kind of biases can lead to improper decision making and then it can lead to investment at irrational prices which can be impacting the overall rate of return opportunities for the investment whereas a strategic approach to direct investment will be helpful in order to manage investment in the long run, because this will be proactive strategies which will be dealing in various scenario and they will always be dependent upon risk to reward factors, rather than depending upon some the behavorial biasness.