Psychology And Investment

Preface 

Psychology plays an important role when it comes to make a decision as the matter of investment is a significant matter and it is not just about crunching the numbers. Behavioural economics states that people are not always rational when it comes to make an important decision, and while taking a decision our mind is influenced by various other factors. People are unable to make a proper decision due to; lack of proper information, failure to analyze the situation properly, an unwillingness to learn from their mistakes, constraints of mind or not having enough knowledge about the subject, etc.

Knowledge about the subject alone is not sufficient enough to make a good investment decision. The study of the human mind and behaviour and how it relates to and affects the process of investing is not only important but also very interesting because each person takes the same types of investment differently.

At times the stock market moves irrationally where the numbers do not support the trend. In such situations, psychology helps us to recognize the erratic behaviour of the market and clear the way for any decisive action. Knowledge of the subject can be learned by reading books but overcoming emotions requires both knowledge and experience and the experience of loss is more important than gain.

When I started my career as a research analyst at a business news channel, I had the opportunity to meet various kinds of investors and market experts. Later when I moved on to different profiles, I carefully observed that psychology matters most to everyone before making any investment decision. Human sentiments deeply influence the decision-making process and it is very difficult for an investor to take any such action that is not influenced by their surroundings. 

Psychology is closely related to investing and when people fail to understand human behaviour, they make wrong investment decisions. The functioning of the mind influences every investment move and the beginning is associated with various characteristics of human emotions such as greed, fear, and many other attractions and resistances.

In this book, I have explained in detail what are those attractions and resistances which I observed while dealing with different types of persons. I felt that the time has come to share my experience with the readers that how psychology impacts us deeply while making investment decisions and with a better understanding of how we can avoid ourselves from taking wrong decisions.

The second part of the book deals with how to analyze a company because apart from investment psychology, knowledge of finance is also important. We hope that this work will be able to throw some light on the complex world of psychology and investment. 

I give special thanks to my younger brother Abhay Srivastava and my friend BN Rahul for their valuable suggestions, without which such work would not have been possible.