Anchoring to a high NAV: a number that is not your return
"The NAV was 85 last month. Now it is 78. I am at a loss."
This is one of the most common — and most misleading — sentences in retail investing. Because the NAV that the family anchored to was not their purchase price. It was simply the highest number they remember seeing on their statement. And the "loss" they feel is not a real loss — it is the gap between today's NAV and a mental reference point that has nothing to do with their actual cost.
Anchoring is one of the most powerful behavioural biases. Once a number enters your mind — a high NAV, a friend's return, a target you set arbitrarily — it becomes the benchmark against which everything is measured. If the fund's NAV was 85 at its peak and is now 78, you feel a seven-rupee loss even though your average SIP purchase price might be 62. You are actually up twenty-six percent. But the anchor says you are down.
This bias causes real damage. Families hold funds that have underperformed for years because they are "waiting to get back to the NAV I bought at." That anchor prevents them from rebalancing into something that better serves their goal. Or they refuse to invest more during a correction because the NAV "used to be higher" — missing the exact moment when additional investment is most valuable.
The number that matters is not the NAV. It is the XIRR — the annualised return on the money you actually invested, at the times you actually invested it. That number is your truth. The NAV is just accounting scaffolding. Do not anchor your emotions to scaffolding.
The families who compound quietly tend to protect the plan from both fear and euphoria. This is perspective, not a personalised recommendation. Decisions belong in conversation with someone who knows your full picture.