A behavioural lens on ‘misvestment’

Last week, my friend Sudha told me she had invested her bonus in a mid-cap stock. When I asked why she chose that company, she replied instantly, “My boss said it will become 10X in five years.” No goal, no logic, no fundamentals, no analysis. Yet, she had placed her hard-earned money into something without knowing her own reason for doing so.

Beneath that confident answer lay a quieter truth: Sudha wasn’t really investing; she was just reacting, and she is not alone. Many people react to fear, to familiar stories, to old myths, to trends, to hype, to social expectations, to the urge to please others or simply to someone else’s conviction. Not all reactions are harmful, but they do not always translate into real investing.

‘Misvestment’ describes a pseudo-investment pattern, an action that feels like investing superficially, but is not grounded in understanding, analysis or intrinsic value. A misvestment taxonomy helps make sense of these subtle behavioural patterns and groups investors into archetypes based on the beliefs and tendencies behind their decisions.

Misvestment drains wealth quietly while giving the illusion of investing, so identifying your archetype gives you greater control over why and what you invest in and helps you avoid repeating the same mistakes. Let’s dig deeper into the archetype.

The Herdvestor

Herdvestors follow the crowd and invest by social imitation. They look at what friends, colleagues, relatives or online groups are doing and assume the crowd must know something they don’t. A few repeated mentions of an investment idea or a shared excitement is often enough to push them into action. They aren’t investing to create intrinsic value; in the name of investment, they simply ‘misvest’ by following the herd. Sudha’s quick leap on her boss’s 10X prophecy places her firmly in this camp of elegant imitators.

The Propvestor

Propvestors place enormous faith in real estate, and they believe that real estate is the most reliable path to wealth creation. “Land, property always appreciates” is their mantra, even when reality paints a different picture. Appreciation becomes real only when you sell and rent. The only steady return tends to be low in India. The average gross residential rental yield in Indian cities hovers around 3-5%, even in high-demand markets. With such modest returns, Propvestors may not be growing their money in real terms because inflation quietly eats into whatever gains they expect.

The Egovestor

Egovestors invest to feed their ego and status, rather than value. Even if the fundamentals are weak, they choose options that sound prestigious or impressive. For instance, without checking the company’s financials, they may chase high-profile IPOs just to boast that they “got an allotment”. Or they might put money into a startup they barely understand because the title of “angel investor” appeals to them.

The Talevestor

Talevestors invest in narratives, not numbers; they invest in stories, not substance. A charismatic personality, a dramatic turnaround tale or any compelling story is enough to sway them. For instance, they buy land or property because a famous hero or sports star endorsed it. Talevestors also jump into ideas based on sweeping stories like “EV is the next boom”, “AI will change the world” or “Crypto is the future”.

The Mythvestor

Mythvestors make investment decisions based on long-held financial myths and inherited beliefs rather than facts. They follow ideas passed down by ancestors, culture or hearsay — gold is always gold; insurance is investment; older companies are safer; mutual funds are risky. These beliefs feel too familiar and comforting to question.

The Notvestor

Notvestors often confuse spending with investing, labelling big-ticket consumption as an investment. They make large purchases that feel like assets but are actually depreciating expenses. For instance, a friend of mine proudly described her twelve-lakh car as a one-time investment, unaware that its value began depreciating the moment it was driven out of the showroom. The weight of the purchase creates the illusion of investing, even though it adds no real value.

The moment you recognise your archetype, misvestment loses its grip and real investment starts to take shape with clarity.

(The writer is an NISM & CRISIL-certified Wealth Manager and is certified in NISM’s Research Analyst module)