"Think Before You Invest"

 "The Psychology of Money: Behavioural Finance Teaches Us"

Behavioural Finance: What It Is and Why It Matters

Have you ever made an investment decision based on a “gut feeling”? Or held onto a losing stock hoping it would bounce back?

You’re definitely not alone and you’re not necessarily irrational.

Behavioural finance helps us understand why we make these very human financial mistakes.

Behavioural finance is a field that combines psychology and economics to explain how people make financial decisions, often irrational ones.

Unlike traditional finance, which assumes people always act logically, behavioural finance recognises that Emotions, Cognitive biases, and Social influences play a huge role in how we invest, spend, and save money.

Key Concepts in Behavioural Finance

1. Loss Aversion

People feel the pain of losing money more strongly than the pleasure of gaining the same amount.

Example: You’d rather not lose $500 than gain $500, this can lead to overly conservative investing or holding onto bad stocks too long.

2. Overconfidence Bias

Investors often believe they know more than they actually do, leading to excessive trading or risky investments.

“I’m sure this stock will bounce back!”, said every overconfident investor ever.

3. Herd Mentality

We tend to follow the crowd even when the crowd is wrong. Think of market bubbles, crypto hype, or meme stocks.

4. Anchoring

We fixate on a reference point, like a stock’s previous high price and base decisions around it.

“It was ₹100 last month; it must go back up!”

📈 Why Behavioural Finance Matters

• For Investors: Helps you recognise and avoid common mental traps.
• For Advisers: Enables better understanding of client behaviour.
• For Students & Professionals: Builds emotional intelligence around financial decision-making.

Understanding these biases can lead to better:

• Risk management
• Long-term planning
• Portfolio diversification

🧭 Conclusion

Behavioural finance doesn’t shame you for your mistakes it explains them.

By understanding how your mind works around money, you can make smarter, more mindful financial choices.

Quick Quiz: What's Your Financial Blind Spot?

"How your brain really handle money decisions? Take this 5 question quiz to find out!"

        “In investing, what’s comfortable is rarely profitable.” by Robert Arnott