Fear, greed and FOMO: The behavioural mistakes costing retail investors crores

India's retail investing boom has transformed the country's capital markets, with demat accounts surging from 4 crore in March 2020 to 21 crore by the end of 2025 and monthly systematic investment plan (SIP) contributions crossing ₹30,000 crore. While greater participation reflects growing interest in wealth creation, experts warn that investor behaviour—not market volatility—is emerging as one of the biggest threats to long-term returns.

According to Gaurav Bhagat, Founder of Gaurav Bhagat Academy, many first-time investors enter the market armed with stock tips but little understanding of risk management, valuation or emotional decision-making.

Behaviour, not markets

Technology has made investing more accessible than ever. Opening a demat account takes just a few minutes, while social media platforms, online brokerages and financial influencers provide a constant stream of stock recommendations.

However, Bhagat argues that easy access has also created misplaced confidence among inexperienced investors. Rather than asking how to become better investors, many newcomers focus only on identifying the next winning stock.

The consequences are visible in the derivatives market.

A Securities and Exchange Board of India (SEBI) study found that individual investors lost nearly ₹3 lakh crore in the futures and options (F&O) segment between FY22 and FY25, with 91% of retail traders ending up in losses. The findings underscore that market participation without adequate financial knowledge can prove costly.

Fear, greed and FOMO at work

According to Bhagat, investing is as much about psychology as it is about finance.

Fear often pushes investors to sell fundamentally strong stocks during temporary market corrections, locking in losses instead of allowing investments time to recover. At the other extreme, greed and the fear of missing out (FOMO) tempt investors into buying overheated stocks simply because prices are rising or because others appear to be making quick profits.

These emotional decisions frequently override sound investment principles such as diversification, valuation and long-term planning.

Bhagat believes many investors fail not because they lack information but because they struggle to control emotional reactions during periods of market volatility.

Learning before risking money

To bridge the gap between market access and investor education, Bhagat advocates simulated investing experiences that allow individuals to learn without putting real money at risk.

He says stock market simulations help participants understand portfolio construction, market cycles and the consequences of impulsive decisions in a risk-free environment. Such exercises also expose behavioural biases, including excessive trading, herd mentality and panic selling, before investors enter live markets.

The objective, he says, is not to generate virtual profits but to build confidence, patience and disciplined decision-making.

Goal-based investing over stock chasing

Bhagat also cautions against constructing portfolios without clearly defined financial goals. Whether the objective is buying a home, funding children's education, planning retirement or achieving financial independence, investments should be aligned with long-term goals rather than short-term market trends.

He believes wealth creation is built through consistent habits such as regular investing, portfolio reviews and disciplined asset allocation instead of chasing multibagger stocks or attempting to time the market.

As retail participation in Indian markets continues to rise, experts say the next phase of financial inclusion should focus on investor education. Building emotional discipline and understanding behavioural biases may ultimately prove more valuable than identifying the next market winner.