Behavioral Bias in Investment Decision Making

An investor needs to make many decisions when it comes to investment, like –

These decisions must be taken by analysing –

However, often what happens is that the investor takes his decision not by careful analysis of relevant information, but based on his behavioural bias like confidence bias, herd mentality, choice paralysis etc. These are discussed below – 

Optimism/ Confidence Bias

Familiarity Bias


Loss Aversion

Herd Mentality

Recency Bias

Choice Paralysis

These behavioral biases also contribute to the wrong decisions while considering Mutual Fund Investments and hence must be avoided to take rational and wise investment decisions.