🧠 Behavioral Finance
Understand how emotions and cognitive biases affect investor decisions and market outcomes.
💭 Common Biases
- Overconfidence: Investors overestimate their ability to predict outcomes.
- Herd Behavior: Following the crowd rather than individual analysis.
- Loss Aversion: Pain of loss outweighs the joy of gain.
📈 Impact on Markets
Behavioral factors often cause markets to deviate from efficiency. Understanding these patterns can help you exploit short-term mispricings or avoid panic-driven mistakes.
📚 How to Manage Bias
Awareness, diversification, and disciplined rebalancing can help mitigate emotional decision-making.