Many people think that investing is all about calculations and analysis. Poring through financial statements, expert analysis, and news releases to determine the best investments.
While true to a certain degree, investor behaviour also has a tremendous impact on portfolio returns. At times I think behaviour has more clout than either technical or fundamental analysis.
Behavioural finance is a fascinating subject. More importantly, understanding its influence on investing is crucial if you want to be successful in the long term.
It is a topic we will look at in depth in the new year.
For now, I suggest you read this article by Christopher Davis, Avoid These Three Investment Mistakes .
It will give you an idea of what is behavioural finance. It also makes a few good practical points on why you should not let emotions affect your decision-making.