How do Emotions Affect the Investment Decisions

Before knowing the effect of emotions on investment decision making, we should know the meaning of emotions. In psychology, emotions are human feeling, thinking, mood or sentiments. There are two main types of emotions. One is positive emotions and second is negative emotions. Except this, every time, human being feels something which may be between positive and negative emotions. Every type emotion plays big role in investment decisions.



 1. A man with huge negative thinking will never take any investment decision. He cannot think the positive aspect of investment. He always feels that investment will lose his hard earned money. So, he enjoyed his life just deposit in saving or FD account in Govt. bank. He does not do any business because he fears that his investment in different assets will not give him benefit. He feels that his assets will be depreciated.

2. A man with huge positive thinking invests his money in every type of project. He is not greedy but he is so hopeful. He thinks that situations will be better today than yesterday. Every day is great day. He has right to live happy life. He expects that his invested Rupee 1 will bring big reward for him.

3. Some people’s emotions are so different when they are getting reward from investment; they become so positive and invest their all money including their earned profit from invested money. But when they see small loss on their investment, they become so negative. They want to liquidate all their investment in cash.

4. Some people want always positive relating to investment decisions whether they face profit or loss. When they get profit, they invest their profit also. When they face loss, they will sell everything for investment in their project. They are mad but they have committed to be positive. They live their life as challenge. They do not care up and downs. They do not shy for doing labor for investing their money. They do not cheat. They do not take money by fraud. But, they are so confident on their investment decisions. They love their business. They love their business idea. Every time, they think about the growth their project. Every time, they stand on their foot. They support their business by investing fresh money. Due to their emotions, they invest money from their every resource.

5. Some people are so sensitive. They start investment with small money. Small fluctuation moves their interest from one investment project to other investment project. They think only about themselves.

 6. Some peoples are gambler from their emotions. They are only interested bet. They feel happy when they win. They feel sad when they get loss. They are real fool of the world. They forget the balance of mind. They want to earn money within short time period. Every market for them is gambling market. They treat share market, gold market, foreign exchange market as the place of gambling. One minute before, they take the decision of buying and one minute after, they take the decision of selling. They bring volatility in the market. They do not trust in long term reward.

Tips : 

* Some people are so expert to get benefit by knowing your emotions. By talk to you for some time and by your behavior, they know what you are feeling. On this basis, they try best to change your emotions. If your emotions will change, your investment decisions will not be taken on the basis of logic. So, like an educated person. You should control on your emotions. A wrong investment decision will make your investment as zero. So, be careful about your emotions. 

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Accounting Education: How do Emotions Affect the Investment Decisions
How do Emotions Affect the Investment Decisions
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