New Delhi, Aug. 2 -- Many mutual fund investors spend considerable time selecting the right scheme, yet their own behaviour often has a greater impact on long-term returns than the fund they choose.

Financial experts say psychological biases frequently prompt investors to buy after markets have already rallied and sell during corrections, reducing the returns they actually earn even when they invest in well-performing funds. This creates what behavioural finance experts call the "behaviour gap", the difference between a fund's reported returns and the returns investors ultimately realise.

According to Protima Dhawan, Director & Unit Head at Anand Rathi Wealth Limited, recency bias explains much of the gap between fund returns and invest...