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Behavioural Finance Implications on Personal Investment Decisions - Essay Example

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Masters
Author : mrazjade
Essay
Finance & Accounting
Pages 6 (1506 words)

Summary

Behavioural Finance Implications on Personal Investment Decisions Name University Course Tutor 14th March 2012 Introduction Decision-making is a vital yet a complex practice. Effective decisions cannot be made by only considering composite models and personal resources that do not take regard of the situation (POMPIAN, 2006: p12)…

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Behavioural Finance Implications on Personal Investment Decisions

This calls for better understanding and insight of the nature of human in the current global outlook, plus advancement of fine skills and the capability to achieve the best from investments. Furthermore, investors need to develop foresight, positive vision, drive and perseverance (BAKER, & NOFSINGER, 2010: p23). Investors vary in all features due to factors such as demographic factors, which entail educational achievement level, socio-economic background, sex, age, and race. The most critical hurdle faced by investors is in the region of investment choices. The most favourable investment decision is a vital consideration and should be proactive in nature. During the design of the investment portfolio, of key consideration should be their financial objectives, the level of risk tolerance, as well as other restrictions. Furthermore, they have to forecast the product mean-variance optimization. This procedure is best appropriate for institutional investors, and more often than not fails for people, who are vulnerable to behavioural prejudice. ...
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