Behavioral finance is a field of finance that considers the psychological and behavioral aspects of people when making financial decisions. It studies how people make decisions, why they make them, and what factors influence those decisions.
Many factors can influence our decision-making when it comes to finance. For example, our emotions can play a role in how we handle money. If we’re feeling stressed or anxious, we may be more likely to make impulsive decisions with our money. On the other hand, if we’re feeling confident and optimistic, we may be more likely to take risks with our investments.
Behavioral finance aims to understand why people make the financial decisions they do, and how those decisions can impact markets and individual financial wellbeing. It can also help investors make better decisions by taking into account the psychological factors that influence people’s choices.