The psychology of investment

Emotional factors such as fear, uncertainty, personal bias, regret aversion and ego, play a much more important role in most people's investment decisions than raw data

Despite efforts to be sensible with our money, research into the psychology of investing shows we are prone to making irrational decisions when it comes to the management of our finances. According to experts in the field of cognitive psychology, our decisions over money have as much to do with emotional and psychological issues such as fear, uncertainty, personal bias, regret aversion and ego as they do the raw data we receive from the market. Here we outline five types of irrational behaviour on which many of us base our investment decisions. Regret aversion We hate losing and tak...