You go after what looks good. Attention-grabbing stocks or assets attract you more than ones that may be fundamentally more attractive. The National Stock Exchange’s monthly bulletin often publishes excerpts from useful behavioural finance studies. In the latest issue, they cite a study that examines investment decision-making through the lens of attention. Brad M. Barber and Terrance Odean at the University of California found in 2008 that individuals are substantially more likely to buy stocks experiencing unusually high trading volume, extreme positive or negative returns, or news coverage. As a result, both large winners and losers attract increased buying. In contrast, institutional investors do not show the same behavioural pattern. In some situations, they do the exact opposite of what individuals do.
Their paper argues that a large pool of stocks to choose from makes buying decisions challenging. Individuals tend to sell shares they already own, and attention-grabbing events can significantly influence purchase decisions.
The story is playing out in markets like the US, Korea and Taiwan. Companies spending significant capital on artificial intelligence-led expansion are receiving the most attention. It would not be surprising if, as an individual investor in India, you are experiencing a ‘fear of missing out’ (FOMO) emotion. In 2026, a strange phenomenon is unfolding: the most underperforming benchmark index is the Nifty 50. India is the world's fastest-growing large economy. It is likely to remain so over the next several years. Yet, the US Nasdaq 100, Korea’s Kospi and the Taiwanese benchmark are witnessing an unprecedented surge.
Foreign portfolio investors are chasing hyped AI-led stocks despite expert warnings that profits could slow for many of these firms. They are selling Indian shares on an unprecedented scale.
There is no dearth of investments in India. A strong pipeline of initial public offerings from companies like Jio Platforms and National Stock Exchange, which have proven their business models, is getting significant attention and capital. At the same time, many of you are hoarding small-cap and mid-cap shares to capture the rally. Mutual funds with portfolios of high-growth small- and mid-cap companies are attracting interest.
However, if you take a leaf from the study, you need to watch for attention bias. You have thousands of companies to look at. You don't have to pick the ones grabbing media or social media attention. You can create your own list based on what you learn.
When you chase stocks hitting headlines or a 20% spike in share price or trading volume, many informed investors have already moved. You are arriving late to the party. As a result, your investment becomes an exit for those early investors. Institutional investors tend to use your increased interest to cut their position quietly.
Don't confuse familiarity with quality. A company grabbing the most headlines need not be a good business available at a fair price.
You need to raise your knowledge quotient to understand what a fair price is. You also need to hold back from rushing to buy an asset where there is already a lot of hype. Apply a cooling-off rule for a day or two to let the frenzy die down. It may be a good idea to create a watch list when markets are relatively quiet. Take help from someone who is an expert in analysing businesses, their financial statements or technicals. You may want to apply that idea to every asset class when you try putting your hard-earned money to work.
If you believe a structural story (like AI or renewable infrastructure) will compound economic growth, you can own it through low-cost index funds or broad ETFs rather than betting your capital on single high-beta companies that are under the media spotlight.
