How psychology skews your investments

When markets tumble, portfolios shrink and panic sets in, most investors feel a strong urge to pull out. Later, when markets rebound and headlines boast big gains, the same investors often rush back in. If this sounds familiar, you've just encountered a subtle but powerful force of behavioural finance - the study of how human psychology impacts financial decisions. In theory, investors are expected to act rationally - basing their choices on data, risk appetite and long-term goals. In practice, emotions and cognitive biases frequently interfere, especially regarding asset allocation - the process of dividing investments among equity, debt, gold and other asset classes. One of the most common