The High Cost of Chasing Market Success Too Late
Most investment failures share a common root cause. People chase investments only after the majority of potential gains have already materialized. This behavioral pattern destroys long-term wealth with remarkable consistency.
Shyam Sekhar highlights this critical issue in his analysis. The deepest irony of equity investing reveals itself clearly. Success often plants the seeds for future failure. When investment themes become overblown, they inevitably set the stage for disappointing outcomes.
Why We Repeat the Same Mistakes
The reasons behind this pattern are not difficult to understand. Investors typically chase successful ideas only after most of their potential has been realized. They tend to overpay for these popular themes. The valuations they accept become their biggest risk.
These decisions stem from behavioral biases. Herd mentality drives much of this behavior. Despite past lessons, investors keep making the same errors. This explains why sustained investment outperformance remains so challenging over extended periods.
Taking Stock of Current Market Realities
Let us examine where we stand today. Recent years have shown a concerning trend. Domestic capital flows have concentrated in the riskiest segments of India's equity market. These areas also tend to be the most expensive.
This approach rarely works favorably. Investors often find themselves wondering what went wrong. The answers lie in our own actions. The fault lines became particularly evident during 2025.
The 2025 SIP Story: A Case Study in Misdirection
Systematic investment plans in equities clearly went astray last year. Investors avoided contrarian opportunities. Instead, they chased the most successful ideas from the recent past.
SIP data from 2025 reveals a troubling concentration. Flows heavily favored risky, overvalued themes. A significant portion of nearly ₹3 trillion through SIPs went to mid-cap and small-cap funds. Recency bias drove this allocation.
Investors chased the best-performing categories. They allocated most of their money there. This strategy may prove problematic. What works well in one calendar year seldom repeats its success in the next.
The Problem with Thematic Investing
Thematic investing rarely delivers sustained success. Yet investors continue following themes that worked earlier. Most investing happens after valuations move well beyond comfort zones.
This leads first to time correction. Later, sharp price corrections follow during derating. Retail investors, especially those experiencing their first market cycle, are learning this lesson painfully. They chased the same themes, sectors, and funds through 2024 and 2025.
2026 may prove defining for those forced to rethink their approach.
Portfolio Positioning in 2025: Missed Opportunities
Most investors showed heavy tilt toward mid-cap and small-cap stocks. They displayed little interest in large-caps. Cyclicals found few takers. Metals were largely ignored. Precious metals remained out of favor at the start of the year.
Ironically, these neglected areas became among the best-performing themes. Yet few investors owned them meaningfully. By year-end, precious metals were being chased aggressively.
Timing matters tremendously when chasing performing asset classes. Chasing too late inevitably brings grief.
The Essential Ingredient: Being Early
The crucial element for investment success is early positioning. Being early provides valuable time. You have time to buy thoughtfully. You can invest adequately. You can add positions during corrections. You can build conviction gradually.
When you enter late, all these actions become compressed. This inevitably hurts outcomes. The right course requires timely movement.
The Need for Correct Portfolio Positioning
The current hour demands correct portfolio positioning. 2026 will favor investors who position themselves better. A more top-down approach has become essential.
The traditional bottom-up approach, while effective historically, may now work only selectively. When macroeconomic conditions align, flows will turn. Capital will chase top-down growth opportunities.
Global capital may return with greater force. When inflows accelerate, larger companies usually become the first destination. This shift often marks a market turn as capital moves toward large-caps.
Positioning portfolios before this happens is crucial. Even if this turn gets delayed or doesn't occur in 2026, correct positioning still offers safety. Positioning matters more than ever before.
The Biggest Risk for 2026: Asset Allocation
The primary risk for 2026 lies in asset allocation decisions. Defensive assets like gold and silver rarely pose such concerns. However, their outlier performance has made precious metals a potential allocation problem.
Many investors believe gold and silver carry no risk at any price. History offers stark lessons to the contrary. When precious metals correct from highs, they typically fall sharply. Recovery often takes years.
Geopolitical factors heavily influence their prices. Outcomes remain uncertain. Blind buying at elevated prices represents one mistake to avoid. Refusing to rebalance poses another danger. Speculating in bubble territory completes the trio of errors to steer clear of in 2026.
Knowing What Not to Do
Understanding what actions to take remains critical. Recognizing what not to do has become equally important. Acting in time to course-correct represents a key priority.
Streamlining asset allocation deserves attention. Positioning equity portfolios correctly should top the list for 2026. Shifts into new themes must occur timely and early. Being late defeats the purpose entirely.
Shyam Sekhar serves as the chief ideator and founder of ithought Financial Consulting LLP. His insights highlight the behavioral patterns that undermine investment success. Recognizing these patterns represents the first step toward better outcomes.
