How to Manage the 6 kind of Behavioural and Emotional Biases in Your Journey to Richness

As a financial coach and CERTIFIED FINANCIAL PLANNER who has walked alongside hundreds of investors—senior professionals, young couples, retired parents, single moms—there’s one thing I can tell you with absolute certainty: money isn’t only about numbers, it’s about emotions.

I’ve witnessed well-informed, well-read clients—CEOs, doctors, and entrepreneurs—make avoidable mistakes in the heat of market panic. I’ve also seen calm, humble individuals with limited financial knowledge stick to their investment plans and come out stronger after every market correction.

So, what makes the difference?

It’s not IQ. It’s not how many spreadsheets you maintain. It’s not your degree.

It’s your ability to manage your behavioural and emotional biases.

And this, my friend, is the cornerstone of what I call the Richness Mindset.

Let me walk you through the most common biases I help my clients overcome—and how you can develop financial wisdom to build lasting richness.

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1. Anchoring Bias: Why We Cling to the Past

Years ago, a client of mine named Suman bought a stock at ₹1800. When it dropped to ₹1200, she refused to sell or even consider reallocating—because her mind was “anchored” to that ₹1800 price point.

Anchoring bias is when we fixate on a specific number—usually the price we paid, or a market high—and base all future decisions around it.

But financial planning isn’t about recovering your past. It’s about realigning with your future.

What I teach:

Let go of “emotional anchors.” Instead, assess each investment’s current fundamentals. Would you buy it today? If not, it doesn’t belong in your portfolio anymore.

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Also read: How to Defend Your Will: Key Legal Steps to Safeguard Your Family’s Interests

2. Confirmation Bias: Only Seeing What You Want to Believe

This one’s tricky. I’ve had clients who are deeply convinced about one political or economic view, and so they only read or follow content that supports it.

For instance, during times of global instability, some investors only look at sources that reaffirm their fears. They ignore contrary data—even when it’s solid and rational.

This is called confirmation bias.

What I coach:

Build a diverse circle of information. I personally follow opposing viewpoints regularly—not because I agree with them, but because they challenge me to think deeper. Financial planning, too, needs objective research and opposing data to find balance.

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3. Recency Bias: Overreacting to What Just Happened

In March 2020, markets crashed due to the pandemic. A few of my clients called in a panic, ready to redeem their entire SIP portfolio.

But those who stayed invested—those who trusted the plan—recovered within months. Some even doubled their corpus by 2022.

Recency bias tricks us into believing that what’s happening now is permanent.

What I practice:

I encourage my clients to view their financial journey like a Google Maps route. A pothole doesn’t mean you cancel the trip. It just means you slow down and keep going.

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4. Loss Aversion: The Fear of Losing is Greater than the Joy of Gaining

Here’s a fascinating insight from behavioural finance: We feel the pain of loss twice as intensely as the joy of gain.

This means that even if a portfolio gains 20% over a year, one sharp 5% fall can trigger panic.

I’ve had a couple hold onto underperforming funds for years, hoping they’d “come back” just because they didn’t want to book a loss. But they ended up losing time—and opportunity.

What I suggest:

Set rules beforehand. Decide when to exit. If a fund underperforms for 3 years compared to its peers, reallocate. Use strategy, not emotion, to make exits.

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5. Status Quo Bias: Inaction is Also a Decision

One of my retired clients once said, “I know I need to switch my funds, but I don’t want to touch anything. What if it goes wrong?”

That’s status quo bias—preferring to do nothing, even when action is needed.

In volatile markets, it feels safer to “wait and watch.” But sometimes, not changing is the riskiest move.

How I help:

We build a system of review—every quarter, we ask tough questions:

• Is your portfolio aligned with your risk appetite?

• Is this fund still suitable for your goal?

• Are there better-performing options?

Having a coach ask you these questions keeps inertia at bay.

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6. Herding Bias: If Everyone is Doing It, Should I?

This bias is deadly in speculative markets—crypto, penny stocks, startup IPOs.

Many investors get caught in the trap of thinking, “If everyone is investing here, it must be right.”

I remember the startup IPO frenzy of 2021. I warned several clients to wait. Some listened, others didn’t—and the latter saw 40-60% drawdowns in a few months.

What I teach:

Never confuse popularity with profitability. A wealth-building portfolio is boring by design—slow, steady, diversified, and aligned with long-term goals.

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The Emotional Cost of Market Volatility

Beyond just money, emotional investing takes a toll on your peace. I’ve seen people lose sleep, have arguments with spouses, and make hurried decisions that contradict their long-term plans—all because of market noise.

The truth is:

Your knee-jerk portfolio shifts during market volatility may derail your long-term goals.

So instead of reacting to the market, I help my clients respond—with calm, clarity, and courage.

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What Can You Do to Stay Emotionally Balanced in Investing?

1. Create a Strategic Financial Blueprint

At The Richness Academy, I coach clients to design a detailed investment plan—aligned with their values, aspirations, and timelines. This way, when markets wobble, the plan holds them steady.

2. Revisit Your Goals, Not the Noise

Markets fluctuate. Your long-term goals shouldn’t. Keep revisiting why you invested—be it your daughter’s education, a peaceful retirement, or your dream vacation. Goals provide emotional grounding.

3. Review Portfolios with an Expert, Not Alone

Most biases creep in silently. That’s why having a coach or advisor helps. I bring in a third-party view that’s not emotionally attached to your investments—but deeply invested in your success.

4. Automate and Diversify

Automation removes emotion from the equation. I recommend SIPs and STPs for clients so that investing continues even when fear strikes.

Diversification is your shield. A portfolio spread across debt, equity, gold, and international assets keeps you protected and balanced.

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The Richness Mindset: Aligning Emotion with Wisdom

Managing emotional and behavioural biases isn’t about suppressing your feelings. It’s about acknowledging them—and building systems that work despite them.

In my journey, both personal and professional, I’ve seen that true Richness lies not just in wealth—but in clarity, resilience, and peace.

I’ve seen single mothers become confident investors. I’ve seen entrepreneurs recover from losses and build 8-figure portfolios. I’ve seen retired professionals find joy in spending from their SWPs guilt-free.

And none of this happened by chasing market trends. It happened by cultivating emotional discipline and financial wisdom.

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Summary Table: Emotional Biases vs Richness Strategy

Bias Behavioural Trap Richness Strategy

Anchoring Bias Clinging to past price levels Focus on current value and future potential

Confirmation Bias Seeking only information that agrees with you Diversify sources and follow data

Recency Bias Overreacting to short-term events Stick to long-term growth story

Loss Aversion Holding losers out of fear of regret Set exit rules in advance

Status Quo Bias Inaction due to fear of change Regular portfolio reviews with a coach

Herding Bias Following the crowd blindly Independent strategy aligned with personal goals

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Your Action Plan Today

• Step 1: Reflect on your last three investment decisions. Were they based on emotion or analysis?

• Step 2: Book a quarterly review call with your advisor or join a community like The Richness Academy.

• Step 3: Set auto-reminders to review your portfolio every 90 days.

• Step 4: Read more about behavioural finance—not to become an expert, but to become aware.

• Step 5: Remind yourself—Wealth is a long game. Emotions are short-term.

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Final Thought

I believe that the real wealth we build is not in numbers, but in mastering our minds.

In every masterclass I conduct, in every coaching session I lead, I emphasize this:

“Financial wisdom is not just about what to do with your money—it’s about how to think when the world around you gets noisy.”

You don’t need to be perfect. You need to be aware.

You don’t need to time the market. You need to trust your process.

And most importantly, you don’t need to chase trends—you need to chase richness in every sense of the word.