Pune – People often prefer immediate rewards over larger benefits in the future, a tendency known as present bias. Even when aware of long-term gains, they may prioritise short-term needs over future goals. This behavioural tendency can lead investors to postpone financial decisions, waiting for what they consider the 'perfect' time to invest.

In the process, they risk missing time in the market-time that could have helped their money potentially grow steadily.

Understanding how present bias influences decisions may help investors reflect on their financial habits and take more balanced steps towards their goals.

What is present bias?

Present bias is when an individual is more focused on present rewards rather than potential future outcomes. In investing, present bias means that investors would rather spend money today than invest it for returns that may come over a period.

For example, an investor might postpone setting aside Rs. 5,000 per month in a mutual fund because they prefer to spend it on present consumption. Over time, however, this delay may cause them to miss out on the potential growth of their investments. Since investing early allows compounding to work for longer periods, postponing it can have an important effect on long-term outcomes.

Why investors delay investing

Here are some reasons why some people may put off or delay investing:

Preference for immediate gratification

Immediate gratification can often feel more rewarding than fulfilling a long-term commitment. For instance, buying new gadgets or spending on new experiences may feel more fulfilling than sticking to a consistent investment plan that may show results over a period. Present bias magnifies this preference, making it harder to start investing.

Uncertainty about the future

The uncertainty of what may happen in the future may also discourage investors from planning ahead. Some may feel that they can always start investing later when they are more settled. However, this mindset can diminish the potential benefits of investing.

Fear of market fluctuations

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