Dreamzunlimited...

  “In your control” – How much you can invest p.m.? “Not in your control” – How much return you will get out of investing?     1)      Even after 10 years & at 12% return, the invested amount (your own capital) is more than the amount generated out of returns. Increasing investment amount is the prudent way (especially in the earlier stages of investment) & it is also the best way, because it is purely under our control.         Learning – Do not chase high returns alone! 2)    The longer you stay invested (more than 15 years), money makes more money. This is the time of actual wealth creation & the compounding effect comes into play.                      Learning – Start investing early & stay invested for long-term!

A scenario where we take decisions based on the recent events , without considering the fundamental aspects & expecting that those events will continue in the future too.  Examples in Investing :  1) Looking at the recent very high returns of a particular asset class, say Equities, & believing that it will continue to perform higher in the future too – we want to invest only in Equities now. 2) Similarly, when the recent equity performance is bad, believing that it is the end of stock market & avoiding it completely now. 3) Looking at recent past performance (high returns) of a particular Mutual Fund & we invest our money in that fund now.  How to Avoid Recency Bias? 1) Avoid FOMO (Fear of Missing Out) & Embrace JOMO (Joy of missing out). FOMO is the off-spring of Recency Bias & results in making wrong decisions, esp. when we see high recent returns. 2) Diversify your investments – don’t get stuck to a particular asset class looking at just recen...