Behavioural Bias: How It Affects One’s Investments

Invest

By InvestingNook • January 4, 2015

Virtually every investor makes emotional decisions. Why do we buy certain companies? Is it because it is one that we can relate to? Do we use their products like the Apple, Nestle, Coca-Cola etc. Essentially, every investor have committed this mistake of purchasing a company based on emotions.

In the short run, the market is a voting machine but in the long run it is a weighing machine

Benjamin Graham

Market prices for companies are mainly driven by emotion in the short run. Anyone who has been investing long enough would realise that the markets are irrational in the short run. There is absolutely no sign of rationality. Prices could be up 5% one day and down 7% the next. Does this mean the fundamentals of the company has changed over this span of 48 hours? The truth of a company lies in its operating results ...

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