Base Rate: The Simple Rule to Avoid Money Mistakes

1. What is Base Rate?

• Base rate means the average chance of something happening.
• Example: If most cars on the road are white, it’s normal that many accidents involve white cars. It doesn’t mean white cars are unsafe.

• Investors often forget base rates and follow trends.
• Example: People buy stocks that have recently gone up, thinking they will keep rising, but they ignore the average long-term returns.

• Overconfidence: Thinking you can always pick the best stock.
• Chasing hot themes: Putting too much money in small risky stocks, while most of the market is large, steady companies.

• Buy when prices are below average, sell when prices are much above average.
• Invest slowly over time instead of all at once.
• Use balanced or multi-asset funds to stay in line with market averages.

• Ignoring base rates can lead to losses.
• Know the averages, stay balanced, and avoid risky guesses.

For any related queries feel free to ask.