We overvalue what we own.
When we own something, we fall in love with it. We think warmly of all the things we have done with it or could do with it (such as experiencing the safety of regular returns with never an unpleasant surprise), so we value it more highly.
This is why people who have been investing in Fixed Deposits since ages don’t wish to budge.
To them moving away from FD in a sense is like acknowledging a mistake which they aren’t willing to; after all “wishing for safety” cannot be a mistake. “Being safe” is “being wise”.
What they don’t realise is that the FD was a different product then and a different one now. What erstwhile was indeed safe it no is.
But the name FD still continues to mean “safety” to them even though it has ceased to be “safe”.
People don’t see it as being different even though interest rates have dropped because the name “FD” means “safe” to them.
What people love is the “safety” and they are right about their choice for “safety” but the question is “whether FD is safe any longer”?
The solution to this is to offer an alternative but to keep the focus on “safety” because the latter is significant.
To be safe is being wise still holds good like it did in the past.
With increased longevity and decreased returns the power of compounding in FD no longer has the ability to make our wealth outlive us and that kind of a situation is extremely unsafe.
- So what does one do to convince FD lovers to change partners?
- One needs to demonstrate that “equity” is safe in the long term.
- To show that “equity” which helps us outlive our wealth is truly the “safe” option.
- To show them that investing in FD isn’t safe because they will land up outliving their wealth which is a very risky situation to be in.
- To appreciate they are smart in seeking safety; to tell them that we are on their side.
Remember they love “safety” and not “Fixed Deposits” . Don’t question their wisdom; question their choice.