Have you ever wondered why you sometimes make irrational decisions with your investments? Do you find yourself holding onto loss-making stocks for too long or jumping on the latest investment trend without thorough research? These behaviours are not random, but are deeply rooted in your psychological biases. Unlike traditional finance, which assumes everyone makes logical decisions, behavioural finance recognises that people often act irrationally due to emotions, cognitive errors, and social influences. These hidden psychological forces can negatively influence your investment choices. This article will explain key ideas in behavioural finance, common psychological biases, and how these can affect your investment decisions. What is behavioural finance? Behavioural finance, a subfield of behavioural economics, explores the psychological factors influencing financial decision-making. It challenges the traditional view of perfect rationality in financial markets, acknowledging the role of emotions, biases, and cognitive limitations in shaping an investor’s behaviour. Understanding these factors can allow you to...