investor psychology #3 Recency Bias

Investor Psychology | Recency Bias Explained in Telugu

Recency bias in telugu video explains how investors are influenced in their investment decisions by recent performance of the shares / stock market / mutual funds and end up with huge losses. Recency bias is the importance we give to recent events in life or investments without considering the history of the events or not considering complete picture in taking an objective decision.

If investors consider only short term performance like most are doing in recent times post Covid, it may end of with bitter experience. Many examples of shares with comparison of prices in 2021 and 2007-08 are discussed so that investors can compare the present situation to 2008 and take an objective investment decision instead of influenced by noise created by many analysts. Most new investors invest in these hot stocks as they are recommended by many analysts on almost daily basis and watching them rising causes a sort of fear of missing the profits in them. But in many cases such chasing of stocks will end up badly for investors.

To avoid recency bias, one should form a habit of considering long term performance of the stock market / shares / mutual funds in which they are investing without excessively influenced by just recent performance. One should stick to their asset allocation plan which is suitable as per their risk profile.

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