Regardless of what asset classes you prefer, your behavioural tendencies are likely to play a much greater role in your investing success than you think. It's a rather strange truth that each year, even the smartest and brightest minds fall prey to behavioural traps that severely impact their wealth creation potential. If you're a Mutual Fund investor, here are a few such traps that you need to be doubly watchful for in 2018.
The Sunk Cost Bias
A classic example of the Sunk Cost Bias is the case of Rahul Verma (name changed), who has been holding on to his investment in a Gold Linked International Fund for the past 8 years, in the idle hope of a recovery. Put simply, the Sunk Cost Bias prevents you from exiting underperforming investments just because you've already spend a lot of time holding them. If you've piled on the funds like there's no tomorrow, and find a bunch of them delivering consistently sub-par returns across long timeframes, it may be time to nudge them out of your portfolio and clean things up in 2018.
