What this Diwali should teach the Indian retail investor

Happy Days Are Here Again – Franklin D Roosevelt’s campaign song in the 1932 US Presidential Elections.

Bury the past… Rebuild, reinvent, redefine the past – Michael Connelly, The Hollow (2026)

Diwali is in the air.

It’s a happy time. And to cash in on this happy time, those in and around the business of managing other people’s money, the OPM wallahs, like every year, are putting out stock picks – stocks, they think, you should invest in now, and make good money in the days to come.

The underlying message being sold is that the worst is behind us and that stock prices can’t fall further from here. So, it’s a good time to buy Indian stocks.

But do the OPM wallahs really know? Or are they just pretending to? If they do know, they would have also known when the stock prices peaked in late September 2024, and asked the investors to be careful about investing in Indian stocks.

But very few did. The majority continued with their buy, buy, buy message. Retail investors drank the Kool-Aid, believed what was being sold, and flooded the stock market with money.

In 2024-25, equity mutual funds saw net inflows of Rs 4.2 lakh crore. In 2025-26, these inflows stood at Rs 3.5 lakh crore. Inflows into systematic investment plans (SIPs) stood at Rs 2.9 lakh crore and Rs 3.5 lakh crore, respectively. A bulk of the SIP money would have been invested in equity mutual funds.

These investors are now learning the biggest lesson in investing. As Jeremy Grantham writes with Edward Chancellor in The Making of a Permabear: “Valuation… is the true measure of investment risk.” If you buy at a high price, you take time to earn returns; that is, if you have the patience to wait it out. Most people don’t and, in the process, earn low returns or lose money.

This phenomenon hasn’t just played out with those investing in stocks. It has also played out for those who punted big time on gold and silver, when prices for these metals peaked in December 2025 and January 2026.

Between April 2019 and January 2026, a period of nearly seven years, gold exchange-traded funds (ETFs), an easy way to invest in gold, attracted total net inflows of Rs 93,174 crore.

Of this, Rs 24,040 crore, or 26%, came in January 2026. Add the Rs 11,647 crore that flowed in during December 2025, and more than 38% of the cumulative inflows were concentrated in just two months. Silver saw a similar madness.

These investors, who jumped into gold and silver at peak prices after watching a reel or receiving a forward in which a financial influencer – a lesser version of an OPM wallah – promised them a one-way ticket to the moon, must have either booked their losses already or sitting on huge ones.

Of course, there is a corollary to this first lesson. Many retail investors assumed they would ride the wave and get out right at the top. They believed what they were told and sold on WhatsApp University.

As Grantham writes with Chancellor: “The… strategy of hanging on aggressively until the very end and then trying to time your jump is very seductive.” But as a new generation is finding out it doesn’t really work. Only if life was as simple as that.

The first lesson brings us to the second: The OPM wallahs will keep coming up with different arguments to keep you buying stocks, equity mutual funds and whatever else they happen to be selling.

That’s their incentive.

In the process, if they get it wrong, they will say other things, trying to shift the blame onto someone or something else.

Let's sample a few interesting philosophical insights currently being offered by the OPM wallahs.

Don't expect fixed-deposit-like returns from stocks. The point being that stocks don’t give guaranteed returns like fixed deposits. Of course, there is nothing wrong with this statement except for the fact that the OPM wallahs should have been shouting this from their Lower Parel-Prabhadevi and BKC rooftops during 2024, when stock prices were going from strength to strength.

But they didn’t. By saying this now, they are basically shifting the blame onto retail investors for trusting them. It’s like the old line in buses of North India: sawari apne saman ki khud zimmewar hai.

Or sample this: Watching the news is not bad. Watching your portfolio go up and down is bad. Again, the blame has been conveniently shifted to the retail investors who invested at peak prices.

Or this: The investors are not a vote bank, so the government doesn't care. This statement feeds into the broader mahaul creation happening around doing away with the long-term capital gains tax, which the OPM wallahs have suddenly become concerned about.

They have been blaming this tax for the stock market not delivering any returns in more than two years. 

The trouble is, when the tax was reintroduced in 2018 or when the rate was increased in 2024, the OPM wallahs gave the respective budgets an eleven out of ten. But they have problems with this tax now.

In fact, one OPM wallah, who I like to call the Pied Piper of Prabhadevi, equated the foreign institutional investors (FIIs) to baratis, whose demands need to be met. So, they argue, the long-term capital gains tax needs to be done away with.

In their search for a villain, the OPM wallahs are trying to bully the government into cutting or abolishing the long-term capital gains tax. Of course, those who shout the loudest about something are usually the ones expected to benefit the most from it.

Nonetheless, as long as the stock market was doing well, some OPM wallahs, of course, off the record, even went on to say that the FIIs should pay this tax.

More than two years without returns have turned the OPM wallahs into philosophers. They have an explanation for everything – except their own greed and the fact that they misled retail investors.

And this brings us to the third lesson: Humans like to be a part of tribes. Social media feeds into that.

Humans have a strong need to belong. Do what others are doing. See what others are seeing. Think what others are thinking. Buy what others are buying. Say what others are saying.

The social construct encourages conformity. And that’s how tribes are formed.

Social media encourages this. As Luke Burgis writes in The One and the Ninety Nine: “Humans, like sheep, have a strong instinct to belong… Social media offers the appearance of connection.”

Which is where the OPM wallahs come in. They understand this need to belong rather well.

When financial influencers keep talking about gold and silver, the OPM wallahs keep pumping smallcap stocks, and everyone on social media seems to be making money, sitting out begins to feel like missing out. Nobody wants to be the odd one out.

The OPM wallahs and financial influencers turn this fear of missing out (FOMO) into a tribal activity, where the biggest fear is not losing money but being left behind. They use social media, with its endless echo chambers, trying to make sure that nobody in the tribe is ever short of reasons to follow the herd.

This phenomenon has been at work over the last few years. At different points in time, retail investors have felt the FOMO and ended up betting big on crypto, online money games and even SIPs. Of course, investors are unlikely to lose money on their SIP investments as they did on crypto and online money games. But the returns may take time to materialise.

Indeed, as Burgis writes: “The world incentivises conformity… In the crowd, people… lose their ability to think critically.”

Doing what everyone else is doing and then believing that your returns will stand out is a delusion. Like they don’t say these days: Delulu is not the only Solulu.

Social media also brings to the fore what psychologists call salience bias. Cory Doctorow defines this in The Reverse Centaur’s Guide To Life After AI as: “Things that matter more (like winning the jackpot) are easier to bring to mind.”

The OPM wallahs use this in different ways.

Financial influencers cut reels about how such and such investor invested in such and such stock at such and such point and made a huge amount of money.

Now, one swallow does not make a summer.

Yes, that particular investor may have made a fortune from the stock. But they had done their due diligence, knew the promoter, had spoken to the company extensively and had both the financial resources and psychological wherewithal to bet big on it.

They were also part of the community networks that helped them identify and back the stock.

By the time such information reaches the retail investor, it has already been traded on. This is a simple fact that most retail investors don’t seem to get. If everyone knows about a trade, it isn’t much of a trade to begin with. Mostly, it’s retail investors being set up, for lack of a better term, to become bakras.

In fact, there is nothing new about this trick. People running multi-level marketing (MLM) schemes have been using it forever.

You become part of the MLM by buying its products and selling them to newer members, who in turn recruit even newer members. Imitation is central to the process.

You see someone already in the scheme apparently making good money (or at least pretending to), and you want a piece of the action.

You are then taken to a conference organised by the MLM company, usually at a local hotel. The stage is full of people who have supposedly made a fortune from the scheme. The basic message is: if they could do it, so can you.

What nobody tells you is where you stand in the MLM hierarchy. By the time you join, those above you may already have made the real money.

As Ben McKenzie and Jacob Silverman write in Easy Money—Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, citing Jon M. Taylor’s 2011 study of more than 400 MLM companies, 99% of recruits lose money, while the bulk of commissions go to a tiny group of top-of-the-pyramid promoters.

Of course, those who lose money aren’t on stage talking up the money-making prospects of the MLM.

Only the good stories and data are brought to light.

Indeed, as every fund manager, wealth manager, experienced relationship manager and mutual fund agent worth their salt likes to point out, the BSE Sensex, India’s most famous stock market index, has given a return of 15% per year since April 1979. (Around 14.4% to be exact.)

What they forget to tell us is that a bulk of these returns were earned up to the Sensex’s then all-time peak in April 1992. The annual returns from April 3, 1979 to April 22, 1992 stood at close to 32% per year.

The trouble is that most of us weren’t around at that point. And even if we were, we weren’t old enough to be buying stocks. Well, everyone doesn’t start buying stocks at 11, as Warren Buffett did.

The returns since the April 1992 peak are 8.5% per year. No OPM wallah likes to mention this. Or that the return since the January 2008 peak has been just a little over 7% per year. These are important numbers because retail investors tend to do a bulk of their buying around peaks.

So retail investors keep getting carried away, limited as they are by their own experience of not having seen enough stock market cycles.

And this brings us to our fourth lesson: Retail investors are limited by their experience.

The BSE Sensex, as of November 2, 2026, had fallen 11.8% from its last all-time closing high in September 2024. To many retail investors, this feels like a huge crash. But is it one?

The BSE Sensex reached its most recent all-time closing high on September 26, 2024. It hasn’t crossed the level since. As of November 2, 2026, it was down 11.8% from its latest all-time closing high.

This is the 17th in the list of top 20 Sensex falls. As of November 2, 2026, it had been 742 days since the Sensex reached its last all-time high. This is the second-longest fall among the top 20 Sensex declines.

The longest lasted 814 days, from September 12, 1994 to December 4, 1996. However, during that period, the Sensex fell by nearly 41%.

It’s this length which makes the 17th biggest fall much worse than it actually is. Also, the lack of experience among many retail investors who started investing only after the pandemic is coming to the fore.

The two biggest market crashes in recent history – the dotcom bust of 2000–01 and the 2008 crash – are now distant memories. Even those who lived through them may have forgotten what it felt like.

Time has a way of dulling the memory of all pain, including market pain. The 2020 crash, meanwhile, was over almost as soon as it began.

And this brings me to the final point: “What should retail investors do now?”

Gold and silver have fallen. Real estate is too expensive and too illiquid. And stocks and mutual funds haven’t delivered the returns that the OPM wallahs promised.

Worse comes worse –  post-tax fixed deposit returns barely beat the rate of inflation, or are even lower.

Well, there are no easy answers.

First, you can’t start preparing for bad times once they are here. So, if you bet all your money on stocks and mutual funds and have barely made any return, my commiserations. The time to buy an umbrella is before it starts raining, not when you are already standing in a puddle.

Second, if you buy assets at their peak prices, then even diversification – or putting your eggs in different baskets – doesn’t work. In fact, many youngsters who have entered the workforce over the last few years and have started investing are finding this out now.

This isn’t their fault really. It’s the luck of the draw. It’s the randomness of life. The OPM wallahs won’t tell you this, but a fair bit of success in investing also comes down to being lucky.

Third, it’s in times like these the fact that return of investment is as important as return on investment comes to the fore.

That is why having some money in fixed deposits and liquid funds makes sense, even if you might not earn enough to beat inflation.

Hopefully, everyone who has burnt their fingers chasing trends in the last few years will realise that now. Like, almost anything in life, this realisation, this experience, will come at a cost.

Fourth, the OPM wallahs are now selling the idea that things can’t get any worse from where they are, and that the future will be better than the past.

While a sense of hope is required to live life well, one also needs to realise that only hope alone cannot be an investment strategy.

Given this, diversification, as psychologically difficult as it is, still remains the only game in investment town.

Of course, the OPM wallahs will talk about this only in passing, given that they really really want you to only buy the stocks and mutual funds that they are selling. That’s the only incentive for them.

But while they are protecting their arses, you, my dear reader, my dear retail investor, should protect yours too. That’s investing 101.

The OPM wallahs will keep telling you that the good times are just around the corner. Maybe they are. But investing – like politics – isn't just about believing every story being sold to you. It is about protecting your money when the stories go wrong. After all, it is your money, not theirs. 

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