Because what you “know for sure” can cost you more than what you don’t.

A client once said to me during a review, “I knew this stock was going to double. Everything lined up. I even told my friends.”

He had put 35% of his portfolio into it. The company tanked six months later.

When I asked why he had bet so big, he said, “I was sure. I had done my research. Everyone else just didn’t see it.”

That wasn’t strategy. That was overconfidence—and it had cost him ₹8 lakhs.

In investing, confidence gives you courage.

Overconfidence gives you blind spots.

And those blind spots can quietly destroy everything you've built.

What Is Overconfidence Bias?

Overconfidence bias is when you:

• Overestimate your knowledge about a company, asset, or market

• Underestimate risk or the chance of being wrong

• Believe your prediction is more accurate than it actually is

• Think you’re better informed or more rational than other investors

In short, it’s the illusion of control.

You feel smarter than the market—until the market reminds you it owes no one anything.

How It Shows Up in Real Portfolios

• You concentrate too much in one stock or theme

• You stop diversifying because you “know what you’re doing”

• You don’t rebalance because “your picks are different”

• You ignore warning signs or red flags

• You double down on losses, convinced they’ll rebound soon

Overconfidence doesn’t just cause mistakes—it causes big, expensive mistakes.

Why Overconfidence Feels So Good

It’s deeply psychological.

When a hunch turns out right:

• You feel validated

• You feel smarter than others

• You start trusting instincts over process

It creates a dopamine loop—the illusion that success came from skill, not luck or timing.

That illusion grows stronger the longer the market is rising.

Until it isn’t.

The Cost of Being “Too Sure”

Overconfident investors often:

• Miss exit signals because they believe they know better

• Overtrade, trying to time everything

• Ignore diversification, believing their view is enough

• Resist advice or data, feeling they’ve outgrown it

And worst of all?

They learn only after a big hit—when ego has been traded for humility.

How to Recognize If You’re Slipping Into Overconfidence

Ask yourself:

• Have I recently ignored advice because I was “certain”?

• Did I take a big position based on a gut feeling, not process?

• Am I assuming past success will repeat itself?

• Am I unwilling to revisit my assumptions?

If the answer is “yes” more than once, it’s time to pause.

Not to panic. Just to realign.

How to Protect Yourself From Yourself

1. Diversify—even when it feels boring.

No one is right all the time. Spread risk by design.

2. Build a written investment plan.

Document your logic before investing. If you can’t explain it, don’t buy it.

3. Review performance with data, not feelings.

What worked, what didn’t, and why? Let numbers speak.

4. Seek dissent.

Have people in your circle who’ll challenge your thesis. Value disagreement.

5. Set thresholds.

Define max allocation limits per stock or asset class. Force structure.

6. Accept being wrong—quickly.

Mistakes are inevitable. Doubling down out of pride compounds the pain.

TL;DR — Too Long; Didn’t Read

• Overconfidence in investing leads to poor decisions, ignored risks, and concentrated losses

• It often shows up as excessive certainty, lack of diversification, and resistance to review

• The more right you feel, the more likely you are to overlook what could go wrong

• Build guardrails: written plans, thresholds, reviews, and voices that challenge you

• In investing, humility doesn’t weaken you—it protects you

It’s not what you know that ruins portfolios.

It’s what you think you know for sure—but never questioned.