Is COVID-19 Triggering These Behavioural Biases in You?
- Discover how biases like conservatism, loss aversion, and action bias can derail SIP investing.
- Understand why behavioural awareness is key to long-term wealth creation.
- Learn how to navigate market volatility with expert-backed insights.
The COVID-19 market crash was more than a financial shock, it was a psychological one. For many investors, it exposed deep-seated behavioural biases that quietly shape our decisions, often at our own cost. Whether it's abandoning your SIPs during a dip or chasing trends at the wrong time, understanding these patterns is the first step toward better investment outcomes. Let’s unpack the most common behavioural traps triggered by market turbulence, and how to avoid them.
Conservatism Bias: Are You Ignoring New Market Signals?
This bias leads investors to cling to old beliefs, even when new information suggests a change is needed. During COVID-19, many investors became deeply bearish and stayed that way, even as markets recovered steadily.
Example: Investors who exited in March 2020, fearing further declines, missed the rebound that followed. Holding on to past fears despite improving fundamentals can delay your re-entry and impact long-term growth.
Pro Tip
When the facts change, adjust your views. Long-term investing means staying objective and responsive, not rigid.
Â
Action Bias: Are You Reacting Just for the Sake of It?
In volatile markets, many investors feel the urge to “do something.” But not all action is wise.
Scenario: After sitting tight during the March crash, some investors rushed to switch funds or redeem after partial recovery, often undermining their original plan.
Instead, continue your SIPs without interruption. They help average out purchase prices during highs and lows, building long-term wealth quietly in the background.
Reminder: Passivity often outperforms hyperactivity. Let your asset allocation—not your emotions—guide you.
Â
Loss Aversion Bias: Are You Letting Fear of Loss Drive Decisions?
Psychologically, losses feel about twice as painful as gains feel pleasurable. This explains why investors who entered at market highs in early 2020 and saw quick paper losses wanted to stop their SIPs altogether.
But remember, temporary red zones aren’t permanent losses. In fact, downturns are opportunities to accumulate more units at lower NAVs.
Advice: Don’t abandon equity SIPs because of short-term setbacks. Stay the course, and your patience could pay off when markets bounce back.
Â
How These Biases Affect Your SIPs
|
 Bias |
 Impact on SIP Strategy |
What You Should Do |
|
 Conservatism |
 Staying out of market despite recovery |
 Re-enter gradually if needed, based on goals |
|
 Action Bias |
 Unnecessary portfolio churn |
 Stick to the plan and review periodically |
|
 Loss Aversion |
 Stopping SIPs after short-term losses |
 Continue SIPs to leverage rupee cost averaging |
Â
Being aware of these biases can help you stay rational, especially when emotions are high. SIP investing isn’t just about returns—it’s about behaviour.
FAQs
1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.
"FinEdge has helped me to understand the future in terms of wealth planning. They are very professional and manages portfolio really well. I am associated with them for more than 4 years and would love to continue. I trust them."
Sunny Mathur
1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.
"Hi I am glad to share my experience . My association with finEdgè is more than 5 years. FinEdge is providing excellent guidance about portfolio understanding and investment. I came through many advisors during this journey and found services improved year on year. It was amazing experience on discussion with Ms Shaheen Beniwal.she has ensured timely portfolio review and suggestions for betterment of my investment..Expecting the same guidance in future also."
Vineet Kritant Tripathi
1800+ Google Reviews. A 4.7 Star Rating. Zero Sales Targets.
"It has been a very pleasant and a smooth experience with FinEdge since the last 30 odd months. Especially would like to thank the financial managers who are assigned who develop a personal connect and have been flawless as far as their follow up and responses are concerned. My manager Mr.Anup Jathanna has been very consistent in achieving this as well. Grateful for his amazing work and knowledge. Keep it up!!"
Vyshak Pillai
Your Investing Experts
Continue Reading
Investing in Volatile Markets: How to Build Resilience and Stay on Track
Investing in volatile markets is never easy, especially when headlines scream panic and portfolios turn red. But market cycles are not the problem. The real challenge lies in how investors react. Building investing resilience, the ability to stay aligned with your goals and decisions through ups and downs, is essential for lasting success. In India, as retail participation grows, so does the need for calm, process-led investing.
.jpg)
Why DIY Investment Platforms Are Failing Indian Investors
While DIY investment platforms promise low-cost, tech-enabled convenience, many Indian investors are learning the hard way that investing success needs more than just automation. Beneath the sleek dashboards and algorithm-driven suggestions lies a troubling trend: falling short of financial goals, impulsive exits, and a growing number of SIP stoppages. So, what’s really going wrong? The short answer: these platforms often fail to offer what investors need most; personalization, emotional guidance, and behavior alignment.
Long-Term Investing: Why the Right Behaviour Matters More Than the Best Product
Kalpen Parekh is the Managing Director and CEO of DSP Asset Managers Pvt. Ltd. With over two decades in investment management, he has previously led teams at IDFC Mutual Fund, Birla Sun Life AMC, ICICI Prudential AMC, and L&T Finance. A passionate advocate of evidence-based investing, Kalpen believes that investor behaviour and long-term discipline are the true sources of alpha. He holds a Master’s in Finance from Narsee Monjee Institute of Management Studies and a Bachelor’s in Chemical Engineering from Bharati Vidyapeeth, Pune.