Challenges Of Financial Behavioral In Personal Investment: Analyzing The Role Of Psychological Factors In Decision-Making

Abstract

This research investigates the part of the psychological factors in such major behavior of us as decision making with regard to investments and also reveals the pains which the science generates. Through an approach that combines both qualitative and quantitative methods including interviews and surveys, we identify key psychological factors that affect investment behavior, specifically emotional biases, the risk of losing money, over-confidence, fear of losses and herd mentality. Manifestations from qualitative interviews illustrate that financial stakeholders including investors mostly encounter emotional effects of fear/greed which bring about imprudent decision-making. Moreover, the investors being different from each other have different risk perceptions and decisions are resulted from individual biases like overconfidence and loss aversion. Numerical survey findings show consistency with perception of risk, loss aversion, and regret aversion depending on the people who participated where the mean scores were high. Investment strategist guns are aimed at overcoming psychological biases using such methods as diversification, setting clear investment goals, seeking in outside expert help, and constant portfolio rebalancing. Overall, this research shows that psychological knowledge should be considered during investment strategy adoption to better prevent biases that affect sound decisions and reduce their negative effects.