Preeti Razdan, 24, is a marketing manager for Barista, a chain of coffee shops, in Chennai. Recently, Preeti’s wealthy uncle passed away and left to Preeti, his only niece, INR 5 million. Preeti consider her current salary to be adequate to meet her current living expenses, so that when she buys a house she’ll have a nice nest egg on which to draw. One of Preeti’s neighbours, Bria, is a financial advisor. Brian told Preeti there was a virtually endless array of investment option. She asked him to present her with two of the best options, and this is what he came up with: A very low risk mutual fund.
With this option, based on the information Brian provided, Preeti estimates that after 5 years she stands virtually zero chance of losing money, with an expected gain of approximately 30 percent. A moderate-risk mutual fund. Based on the information Brian provided her, Preeti estimates that with this option she stands a 50 percent chance of making a 70 percent gain but also a 50 percent chance of losing 30 percent. Preeti prides herself on being rational and objective in her thinking. However, she’s unsure of what to do in this case. Brian refuses to help her, telling her that she’s already limited herself by asking for only two options.
While driving to her parents’ house for the weekend, Preeti finds herself vacillating between the two options. Her older is also visiting the folks this weekend, so Preeti decides to gather her family around the table after dinner, lay out the two options, and go with their decision “You know the old saying-two heads are better than one,” she says to herself, “so four heads should be even better. ” Questions:- 1. Has Preeti made a good decision about the way she is going to make the decision? 2. Which investment would you choose? Why? 3. Which investment do you think most people would choose?
4. Based on what you have learned about groupshift, which investment do you think Preeti’s family will choose? Question & Answer: 1. Has Preeti made a good decision about the way she is going to make the decision? As per the case study, Preeti is going to show case both the options to her family folks and go with their decision – she thinks that four heads should be even better than two heads but we also have saying that “Too Many Cooks Spoil The Broth” According to me she is not taking good decision, because I feel that she can consult with her family members in taking their experience & advice but the decision should only from her side.
She needs to have Practical, Rational, & Personal approach in taking her own decision while opting for the better investment. 2. Which investment would you choose? Why? At the first place, I will not restrict my self with only two options, if I would have been in Preeti’s place than I would have requested my financial advisor (Bria) to give atleast five investment plans. (Investment Portfolio) and choose one among the best of the best investment which will be suitable for my age, income & market environment.
However, if I need to choose from the above given two investment plan than I will go with – A Very low risk mutual fund. – Zero chance of losing money, and a gain of 30% approximately. Reason of choosing very low risk MF: ? Not ready to take high risk. 50 % chance of making 70 percent gain. 50% chance of losing 30 percent – A Moderate –risk mutual fund (According to me it is a high risk investment, because it has 50% chance of losing minimum 30 %) ? As it is my first investment plan and it’s just my expectation, that the outcome would be Zero chance of losing money, and a gain of 30% approximately. . Which Investment do you think most people would choose? According to me, it depends upon the type of investor. ? Individual investor (Like Preeti Razdan) ? Company investor (Like ICICL MF) If it is individual investor, he might go with A Very low risk mutual fund which can also be shown under has investment proof which is tax exempted. And if it is company investor, the company might go with A Moderate –risk mutual fund and take calculative risk – has the duration of the investment is not provided in the case study.
4. Based on what you have learned about groupshift, which investment do you think preeti’s family will choose? According to me Preeti’s family should go with A Very low risk mutual fund option as it is an individual investment. The Groupthink Process To conclude: Preeti needs to develop in taking correct & appropriate decision in each given particular situation, which helps her in to leading a successful personal & professional life as we leaving in a dynamic environment. She needs to have the four management skills – Planning, Organizing, Leading & Controlling while taking efficient & effective sound decision.