Investor Psychology

Investor psychology refers to the emotions and cognitive biases that influence how individuals make investment decisions. In behavioral finance, it recognizes that investors are not always rational; they may act based on fear, greed, overconfidence, or herd behavior. These psychological factors can lead to irrational market movements, such as bubbles and crashes. Understanding investor psychology helps explain why markets can be volatile and why individual investors might deviate from sound financial strategies. By acknowledging these human tendencies, investors can work towards more informed and balanced decision-making.