It is a universally acknowledged truth that greed and fear are the enemies of investing, more so while investing in the equity market because they cloud knowledge and discipline. In the current scenario, investors in the equity market may be anxious about market levels with the S&P BSE Sensex and the Nifty 50 poised at record highs. This article highlights how investors should avoid these emotions and stay focused on their financial goals by taking a disciplined approach to investing.
Historical trend shows
Buy low and sell high is the basic thumb rule for all investors. But investors typically forget this rule because of behavioural biases. The herd mentality is a perfect example of this behavioural bias. Investors tend to move in a herd while investing, buying more when markets are on the rise, and reducing or selling their holdings when markets are on a downturn. This trend is reflected in an analysis of historical net flows into equity mutual funds (used as a proxy for retail investors).