Your brain prices tomorrow with yesterday's headlines.
The quiet bias that buys at tops and sells at bottoms.
In March 2020, thousands sold everything — and locked in permanent losses.
Rahul had been investing steadily for three years. Then March 2020 arrived. Every news alert was worse than the last. His brother had already stopped his SIP. 'This feels different,' Rahul thought. It did feel different. So he stopped too. He was right about the feeling. He was completely wrong about what it meant.
Your brain gives extra weight to what just happened. Last month's crash feels more real than thirty years of market history. This is recency bias — using the most recent chapter to predict the entire book.
After a long bull run, buying feels safe and obvious. Markets have been rising for months. Prices feel like they belong exactly where they are. That comfortable feeling is recency bias nudging you toward the top.
After a sharp fall, selling feels logical and urgent. Prices have been dropping. Each new low confirms the direction. That same urge to get out is recency bias again — now pushing you to lock in losses at the bottom.
The Sensex fell 38% in February and March 2020. It felt like the world had changed permanently. It recovered to pre-crash levels within six months. Investors who sold in panic didn't benefit from that recovery. The danger that felt permanent was temporary. The losses they locked in were not.
The shopkeeper who stocked sweaters in February
Imagine a shopkeeper who sells woollen sweaters. In December, they fly off the shelves. Excited, he spends all his savings to stock up on thousands more in January, believing the cold wave will last forever. By late February, summer starts. The sweaters lie unsold. Panicking, he sells them at a loss. He treated a passing season as a permanent climate shift. Recency bias makes us do the same with our money—treating a temporary market crash or rally as the permanent truth.
Why this matters
The next crash will feel permanent. It will not be. Your SIP auto-debit does something your nervous system cannot — it buys more units when prices are lowest. Every month you pause is a month you missed buying at the cheapest prices of the decade. Recency bias doesn't announce itself. It arrives dressed as common sense. It costs like panic.
Slide the pause. See what waiting on the sidelines truly costs.
The widget below lets you slide the panic pause from zero to twenty-four months. Watch what waiting on the sidelines costs by retirement — while the market recovered and you did not.
The Cost of Waiting on the Sidelines
Pausing ₹5,000 SIP for 6 months costs you ₹3.2 lakh by retirement due to missed compounding. (12% p.a. return assumed).
A calendar rule beats last month's headlines every time.
Where people go wrong
- Stopping your SIP after a market crashYou stop buying exactly when units are cheapest. The SIP only restarts after prices have risen — you missed the entire recovery discount.
- Waiting for the market to 'stabilise' firstBy the time markets feel stable, most of the recovery is already priced in. You missed the best months sitting safely on the sidelines.
- Chasing last year's top-performing fundMarkets mean-revert. Last year's best fund is frequently next year's underperformer. Past performance is recency bias with a glossy brochure.
- Shifting to FD after a crash, back to equity after recoveryYou move to safety at the bottom and return to risk at the top. This is the opposite of what returns require.
Your brain uses last month's crash or rally to price tomorrow — thirty years of data is more reliable.
A SIP on autopilot buys more units in a crash — the mechanical opposite of what fear tells you to do.
Let a calendar decide when you invest, not last month's news.
Recent events are emotionally vivid in a way that thirty years of data never are. Your brain prices tomorrow using only last month's headlines — and that is exactly when it is least reliable.