Investing in mutual funds? Experts explain the behavioural biases that can quietly reduce your long-term returns

Behavioural biases such as recency bias, loss aversion, and FOMO cause investors to buy after rallies and sell during corrections, reducing long-term returns.

Recency bias led investors to put 75% of Gold ETF inflows into gold after it had already risen 72%, resulting in average investor returns of only 23.5% while gold gained 117% between March 2024 and March 2026.

Protima Dhawan (Anand Rathi Wealth Limited) says recency bias is the biggest wealth destroyer as investors chase recent performance.

Rhishabh Garg (FundsIndia) notes that herd mentality, FOMO, and overconfidence encourage frequent switching and market timing, hurting returns.

Madhu Lunawat (The Wealth Company) says the brain is wired for survival, not wealth creation, so investors should write down reasons before selling and wait 24 hours.