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The sensex and Nifty are at record highs, causing retail investors to consider investing. However, industry experts warn against investing impulsively due to recency bias and herd mentality. It is important to consider past events and future situations. The sensex has only given a little over 10% return in the last year and two years. Other assets like gold and Bitcoin have provided higher returns. The right strategy for retail investors is to set investment goals, timeline, and invest through the SIP route. Wealth managers also caution about potential volatility due to the upcoming Lok Sabha polls. MUMBAI: The sensex and Nifty are at record highs . Are you kicking yourself for not investing when these indices were at their lows earlier in the year? And will FOMO force you to invest at these record levels? Retail investors may get swayed by looking at numbers in isolation without considering past events and likely future situations. Worse, some even make the mistake of investing their hard-earned money in such times without diligence, only to regret later. Industry experts warn of such behaviour. 'Investing by impulse' is not the right approach in the long term. "Investors should refrain from 'recency bias'," said a veteran of the mutual fund industry. Recency bias is a behavioural issue where people tend to give more importance to recent events over historical ones. For example, if one looks at the current sensex level - that is near the 69K mark - without considering the fact that in the last one year, it has given a return of a little over 10%. Over the last two years, the compounded average return is just a tad above 10%. There are other assets which have given much higher returns: Gold has given a return of nearly 19%, while Bitcoin's 150% return is unmatched by any other asset class. "Now, if a person is investing just because the sensex is at an all-time high, he's giving in to recency bias," the fund industry veteran said. "I see a lot of cases where, along with recency bias, investors are also captive to the behaviour of herd mentality." In such situations, inexperienced investors follow friends, relatives and peers who are also investing without much thought or experience. So, what should be the right strategy for retail investors to invest for the long run? The three things to keep in mind are: Set your investment goals, set the timeline and invest through the systematic investment plan (SIP) route. "Holding your investments for a long period of time and using the SIP route can help one create wealth in the long run," said Mukund Seshadri, an AMFI certified MF distributor.Wealth managers and financial planners also warned that with the Lok Sabha polls slotted for mid-2024, volatility in the stock market could increase. About the Author Partha Sinha Follow On Partha, senior assistant editor (markets) at The Times of India, Mumbai, covers the financial markets, mainly the stock market, mutual funds, banking and insurance sectors. He is a sports enthusiast. His hobby is philately. Read More FOLLOW US ON SOCIAL MEDIA Visual Stories Previous 10 Most Affordable Cities in India to Buy a House business Most Visited Monuments in India business The Pros and Cons of Investing in Value Stocks business Investing in Small-Cap Stocks: Top 10 Tips for Absolute Beginners business 10 Ways to Earn Money Online by Selling Physical Products business Richest Cricket Players Across the World business 10 Things You Didn’t Know About Warren Buffett’s Investment Process business Priyanka Chopra Net Worth: Know How Rich is Global Actress business Top 10 Benefits of Investing in Small-Cap Stocks business 15 Best Tax Saving Schemes in India business Next 1 2 3 Elections Election Result 2023 Telangana Election Result Rajasthan Election Results MP Election Result 2023 Chhattisgarh Election Result Mizoram Election Result TOP TRENDS Cyclone Michaung Revanth Reddy Chennai Cyclone Sukhdev Singh Gogamedi Glenn Maxwell Israel Hamas War
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