Investment Theories

Investment theories are frameworks that explain how investors make decisions and how markets function. For example, the Efficient Market Hypothesis suggests all available information is already reflected in stock prices, making it hard to outperform the market consistently. The Modern Portfolio Theory emphasizes diversifying investments to balance risk and return. Behavioral finance explores how psychology influences investment choices, often leading to biases. These theories help investors understand market behavior, manage risks, and develop strategies to achieve financial goals efficiently.