Is survivorship bias affecting your performance ?

Today’s Daily Byte

The market continued to decline, despite expectations that the Federal Reserve might announce rate cuts during their speech overnight, potentially causing a market bounce. However, the market seems to be ignoring this narrative of interest rate cuts, focusing instead on the recent actions of foreign institutional investors (FIIs). These investors are causing more selling in the market, driven by concerns around SEBI’s new circular on derivatives positions. Domestic investors, on the other hand, are not yet selling, but FIIs continue to liquidate their positions, with nearly $0.8 billion sold just yesterday.

Reading Time : 4 Minutes

Is survivorship bias affecting your performance ?

Survivorship bias is a common mental trap in investing. It occurs when we focus only on the stocks or companies that have survived over time while ignoring those that failed. This bias can distort our understanding of past performance and lead to incorrect conclusions about the future.

What Is Survivorship Bias?

Survivorship bias makes us believe that the current set of stocks in an index, like Nifty, has always been representative of the market. . . . . .

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Indices are a momentum portfolio

The Sensex, India’s most iconic stock market index, has undergone significant changes in its composition over the last three decades. A close look at its evolution from 1998 to the present reveals how industries rise and fall, and how the index reflects shifting economic and market trends.

Here are some key takeaways from this fascinating transformation:. . . . .

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