A Study on the Influence of Behavioral Biases in Investment Decision

The financial market is significantly influenced by investor psychology, with behavioral biases shaping investment decisions. The Indian mutual fund industry has grown rapidly, with Assets Under Management (AUM) exceeding ₹40 trillion. Despite this, rather than using logical analysis, many investors base their decisions on biases, leading to inconsistent investment patterns. The impact of behavioral biases on investing decision-making, including herd mentality, anchoring, loss aversion, and overconfidence, is investigated in this study. The primary objective is to analysed how these biases affect investor choices and suggest ways to promote rational financial behavior. A structured survey was conducted among investors in Bengaluru city, and data was analysed using statistical models, including regression and factor analysis, with spss as the analytical tool. The study evaluates the degree and influence of cognitive as well as emotional biases on investing behavior using important behavioral finance theories. The results show that psychological biases often cause investors to stray from logical decision-making, which impacts the performance of their portfolios. Over confidence leads to excessive trading, while loss aversion discourages necessary risks. The study emphasizes the necessity of bias-mitigation techniques and financial literacy initiatives. Future research can explore behavioral interventions to improve investor decision-making and financial stability.