Archive for August 23, 2012

Behavioural Finance

Behavioural Finance

Most people often devote rather waste a lot of time finding the next big investment , hot stock , fund , real estate and so on. However the most important thing that impacts every family’s overall financial well being is the area of behavioural finance. This is often a neglected area by most people. Behavioural Finance is the study of how emotions and psychology affect financial decisions.

Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision-making process. We all know that this is never the case and human emotions and psychology play a big role in any financial decision making process.

According to Gary Belsky and Thomas Gilovich, authors of a fantastic book, Why Smart People Make Big Money Mistakes And How To Correct Them, “Behavioural Finance or Behavioural Economics combines the twin disciplines of psychology and economics to explain why and how people make seemingly irrational or illogical decisions when they spend, invest, save and borrow money.” » Read more..