Summary: As we grapple with the COVID-19 pandemic, here is a brief overview of existing health insurance, new COVID-19 specific insurance policy and life insurance.
Ever wondered about fallacies in our thinking? And here is my review of the Book ‘The Art of Thinking Clearly’ by Rolf Dobelli. Although this book may not hold the key to happiness, at the very least it acts as insurance against too much self-induced happiness. The book emphasis learning to recognize & evade the biggest errors in thinking.
Below I have summarized a few important Bias described in detail by the Author.
SURVIVORSHIP BIAS: People systematically overestimate their chances of success. A detailed study of once-promising projects, investments & careers will help you clear your mind. Few ventures make it great & they get highlighted.
But a very high number of failed ventures? No one speaks about them.
SWIMMER’S BODY ILLUSION: How the illusion works for a product or a company to be successful? Professional swimmers don’t have perfect body because they train extensively. Rather, they are good swimmers because of their physiques. Similarly, models advertising for cosmetics are born attractive and beautiful. Thus, leaving an illusion on female consumer that it’s the effect of cosmetics that had made them one.
While we go on reading we find some interesting examples & briefer on Social Proof, Sunk Cost Fallacy, Reciprocity & Retaliation, Authority Bias, Availability Bias & Story Bias. The perilousness of Hindsight Bias is very well explained and here is the mother of all misconception i.e. Confirmation Bias, Forecast illusion, Conjunction Fallacy.
The author also gives an insight into how incentives play a major role in the target achieving. The examples of him explaining Outcome Bias are flawless. Then there is his theory of Liking Bias which may help in rocketing sales.
His detailing on Groupthink, Gambler’s fallacy, Scarcity Error, Social Loafing, False Causality & Inductive thinking is a must-read that can’t be summarized in few words. He gives a glimpse of classic examples of why we fear bad over good or loss over gain.
He is right on target in explaining every time a person or firm winning a bid may not end up in a winner situation which he summaries as Winner’s curse. The reason may be simplified by just saying that the real value of many things we are bidding is uncertain and additionally, the more interested parties, the greater likelihood of overly enthusiastic bid and last but not the least outdoing competitors at any cost.
Everyone is beautiful at the top! Yes, that’s the sneaky part of the Halo effect, which he characteristically explains how it works on a subconscious level, thereby obstructing our view of true characters.
Once again, he nails it by giving a classic example of Russian Roulette in his brief about the Risk of easy money. Risk is always not directly visible. Those who speculate on junk bonds, options and credit default swaps, thus making millions, should never forget that they flirt with many alternative paths that lead straight to ruin.
Therefore, always consider what the alternative paths are.
He emphasizes Framing i.e. It’s not what you say, but how you say it, perfectly explained by one of his many other brilliant examples. A crime novel would be rather dull if, from page one, the murder was shown as it happened. Even though we eventually discover the motives, the novelist’s framing injects thrills and suspense into the story.
Below are some of the rather short briefings on his other chapters which leaves a majestic effect on how you think.
Action Bias: If a situation is unclear, hold back until you can assess your option.
Omission Bias: If you are not part of the solution, you are part of the problem.
Self-Serving Bias: Whereas failures are blamed on external factor & success is attributed on ourselves.
Hedonic Treadmill: No effect is permanent; every effect fizzles out as time passes.
Association Bias: Tendency to see connections which impacts or influences the quality of our decisions.
Contagion Bias: Incapability of us ignoring the connection we feel to certain things that may or may not be directly related.
These are just glimpse or highlight of the author’s knowledge. Rolf has indeed brilliantly penned down his ocean of knowledge to utter brilliance. Why don’t you check the book and let us know what do you think?
Summary: The new tax regime offers lower tax slabs. But many deductions and exemptions available in the old tax regime cannot be availed of. In the new regime, you will have the freedom to invest in any instruments without worrying about tax benefits. But the old regime offers for systematic saving and investment and you can take advantage of many exemptions. Check your income, the various deductions and exemptions that you avail of. If they are important for your financial plan, stick with the old regime. You might save some more cash if you pay less tax but will lose out on investments and the returns on them.
As per Budget 2020, taxpayers have two options -
Continue with the old regime and pay tax at the existing rates, or
Move to the new tax regime. It contains seven slabs with lower tax rates up to the taxable income of ₹15,00,000 but the following deductions from gross income cannot be availed of -
An individual (not a senior citizen) earns a salary of ₹8,00,000. He does not earn any other income. He does not make investments in tax-saving instruments.
He pays less tax under the new tax regime.
In the example below, the individual earns ₹ 16,00,000.
Here, he makes enough tax-saving investments and takes advantage of relevant exemptions and therefore pays less tax under the old regime.
But if his total deductions are 3,00,000, then the tax payable under the old regime would be ₹ 2,10,600 which is the same as the tax under the new regime. On the other hand, if the deductions and exemptions availed are only ₹ 2,50,000, then the tax under the old regime would be ₹ 2,26,200 which is higher than the tax as per the new regime. But then the individual is foregoing investments and the returns on them. This negates the cash gains made.
Some points to remember while filing taxes this year -