'First investment decision an utter disaster...': Why Shankar Sharma warns against falling for recency bias in gold

Gold price today: Veteran stock market investor Shankar Sharma cautioned investors against falling prey to recency bias — especially when it comes to investing in gold.

In a candid post on social media platform X (formerly Twitter) on May 28, Shankar Sharma shared a personal anecdote from his teenage years, recounting how his very first investment decision — putting money into gold — turned out to be, in his own words, an “utter disaster.”

Following his father's passing, Sharma had sought financial guidance from the State Bank of India's (SBI) manager at its main branch in Dhanbad. The manager advised him to convert his small fixed deposits (FDs) into gold, promising better returns. Trusting the advice, Sharma made the switch.

However, he said that over the next twenty years, his returns were half of what he would have earned from FDs.

In 1981, gold prices hovered around ₹1,670, and rose to ₹4,300 by 2001, generating a CAGR of 4.8%.

Recent gold rush

Sharma's comments come at a time when gold has witnessed a meteoric rise in both international and domestic markets. In the last one year alone, spot gold prices in India have surged from nearly ₹72,000 levels to the milestone of ₹1,00,000, delivering 40% returns.

According to a report by the World Gold Council, gold demand remained firm in the first quarter of 2025 and was the highest for the first quarter of the year since 2016. A range of factors like US tariffs, geopolitical uncertainty, stock market volatility and US dollar weakness aided the gold demand.

While gold has indeed performed well in recent years, Sharma's story serves as a reminder of the dangers of recency bias in investing.

Sharma's experience underscores the importance of avoiding recency bias — the tendency to make investment decisions based on recent trends without considering long-term data.

Ideally, investors should approach asset allocation with a long-term perspective, diversifying their portfolios across various asset classes to mitigate risks and capitalise on potential returns.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.