Investment decisions are made by investors and investment managers.
Contents
Factors influencing Investment Decisions.
There are various factors which effect the financial decision making of an individual of which demographic variables like age, gender and occupation and personal financial risk tolerance are the most important one. Risk tolerance is a crucial factor that influences a wide range of financial decisions. The objective of any financial investment is to get good returns. In reality it is observed that many a times there is a gap between individual’s perceived return and actual return. The mistake lies in the decision making process which is influenced by the risk tolerance of an individual. Research indicates that people tend to overestimate their actual level of risk tolerance because of the desire to appear socially acceptable. Understanding investment patterns and financial decision making has always been of great interest to researchers and financial service providers and planners. Investment pattern of individuals and investment decisions are influenced by demographic variables and risk tolerance
Investors commonly perform investment analysis by making use of fundamental analysis, technical analysis and gut feel.
Investment decisions are often supported by decision tools. The portfolio theory is often applied to help the investor achieve a satisfactory return compared to the risk taken.
Investment decision biases
Bad decisions are often followed by a feeling of investor's remorse.