Recency Bias: The Hidden Trap in Equity Mutual Fund Investing
In the world of investing, our minds often play tricks on us — and one of the most common traps is recency bias. This bias leads investors to make decisions based on recent performance, rather than long-term potential.
Over the last year, many investors have shied away from equity mutual funds due to their short-term underperformance. The disappointment from muted returns has made people believe that mutual funds no longer work. Ironically, the same investors were eager to invest when the markets were rallying and mutual fund returns looked impressive.
This emotional shift is a classic example of recency bias — judging an entire asset class based only on what has happened recently.
However, successful investing is not about reacting to short-term trends, but about staying disciplined through market cycles. Mutual funds are designed to create wealth over time, not overnight. When markets consolidate or move sideways, that’s often when the real long-term opportunities are being built.
Interestingly, what’s happening now in the metals segment mirrors what we saw in equities last year. Gold and Silver have delivered one-sided rallies, attracting massive investor attention.
At Next Portfolio, we have been bullish on Gold since ₹50,000 per 10 grams and Silver since ₹90,000 per kg. Our stance remains positive even today — both still hold potential for long-term investors.
However, every bullish trend comes with phases of consolidation and accumulation. Just as equities are doing right now, metals too may witness a pause or short-term correction before resuming their next leg of growth.
In many ways, metals stand today where equities stood last year — shining bright after a strong rally, while equities quietly build their base for future performance. Markets move in cycles, and patience remains the most powerful investment strategy.
So whether it’s equities, gold, or silver, remember:
Stay focused and with your asset allocation
Avoid emotional reactions to short-term trends
Keep accumulating systematically
Because in the long run, discipline always outperforms emotion — and consistency beats timing.
Akshay Tiwari
Next Portfolio
🌐 www.nextportfolioindia.com
AMFI Registered Mutual Fund Distributor
