MAKING EMOTIONAL DECISIONS
It's true that investing is part science and part art. Because of this, generally speaking, successful investing should contain elements of each. Decisions made purely by emotion can bring disastrous results, just as decisions made only from a computer program can also pose a problem. Emotional decisions are often tainted with biases.
For example, when an investor buys a particular investment and it subsequently rises, they may adopt the belief that they were sure that would happen. Conversely, if the investment declines, they may convince themselves that they had a hunch that could happen as well. This inconsistency is because human behavior has a tendency to arrange our thoughts to fit the thesis of the moment.
This is where 'behavioral finance' enters the picture. Psychologists have identified a number of human biases which explain certain inconsistent patterns of behavior. The truth is, good investment decisions contain elements of number crunching as well as human reasoning. And, although it's important to recognize this, it's much easier said than done.