The high cost of chasing market success too late
Behavioural bias and late entry into winning themes can destroy long-term wealth
Most investment failures happen because we chase success too late and too fast. The deepest irony of equity investing is that failure is often seeded in success. When success becomes overblown, it inevitably becomes the seed of future failure. The reasons are not difficult to understand. People chase investments only after most of the success they can deliver is behind us. Investors also tend to overpay for successful ideas, and the valuation they pay becomes their biggest risk. These are behavioural decisions, clearly driven by herd mentality.
Yet, we forget past lessons and end up making the same mistakes. This is why sustained investment outperformance is so difficult over long periods. Let’s take stock of where we are today.
Let us take stock of where we are right now. In recent years, domestic capital flows have been concentrated in the riskiest and most expensive parts of India’s equity market. This rarely works out favourably and leaves investors wondering what went wrong. The answers are not hard to find—they lie in our own actions. The fault lines were evident in 2025.
SIPs (systematic investment plans) in equities was clearly misdirected. Investors avoided contrarian bets and chased the most successful ideas of the recent past. SIPs in 2025 show a concentration of flows into risky, overvalued themes. A significant part of nearly ₹3 trillion via SIPs went to mid- and small-cap funds, due to recency bias. Investors chased best-performing categories and allocated most of their money there. This may prove problematic.
What works well in a calendar year seldom works in the next. Thematic investing rarely delivers sustained success. Yet, investors follow themes that worked earlier. Most investing happens after valuations move well beyond comfort zones, leading first to time correction, and later to sharp price corrections on derating.
Retail investors, especially those in the first market cycle, are experiencing it after chasing the same themes, sectors and funds through 2024 and 2025. 2026 may prove defining for those who are forced to rethink. Shifts into new themes must be timely, early, and you must never be late.
Portfolio positioning in 2025
Most investors were heavily tilted towards mid-cap and small-cap stocks, with little interest in large-caps. Cyclicals were avoided. Metals were ignored. Precious metals were out of favour at the start of the year. Ironically, these were among the best-performing themes, yet few investors owned them meaningfully. By year-end, precious metals were being chased aggressively. When you chase a performing asset class matters. Chasing it too late brings grief.
The essential ingredient of investment success is being early. Early positioning gives time—to buy, to invest adequately, to add during corrections and to build conviction. When you are late, all these actions get compressed, hurting outcomes.
The right course
The need of the hour is correct portfolio positioning. 2026 will favour investors who position themselves better. A more top-down approach is essential. The traditional bottom-up approach, while effective in the past, may now work only selectively.
When macros align, flows will turn and capital will chase top-down growth. Global capital may return with greater force. When inflows accelerate, larger companies are usually the first destination. This shift often marks a market turn as capital moves towards large-caps. It is important to position portfolios before this happens.
Even if this turn is delayed or does not occur in 2026, correct positioning still offers safety. Positioning matters more than ever.
The biggest risk in 2026 lies in asset allocation. It is rare for defensive assets like gold and silver to pose such risk, but their outlier performance has made precious metals a potential allocation concern. Many investors believe there is no risk in buying gold and silver at any price.
History offers stark lessons. When precious metals correct from highs, they fall sharply and take years to recover. Geopolitics heavily influences their prices, and outcomes are uncertain. Blind buying at elevated prices, refusing to rebalance, and speculating in bubble territory are mistakes to avoid in 2026.
Knowing what to do is critical. Recognising what not to do is becoming equally important. Acting in time to course-correct, streamlining asset allocation, and positioning equity portfolios correctly should be the top priorities for 2026.
Shyam Sekhar is the chief ideator and founder of ithought Financial Consulting LLP.
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