Anybody with some basic knowledge about what is a Demat account and how to buy and sell stocks can invest in the stock market. Behavioural finance is a pervasive field that studies the behaviour of investors, and there is a lot of research underway on the factors and biases that influence investors’ perceptions.
Here are some of the crucial factors that influence an investor’s perception of the Indian stock market and his investment decisions.
Investor’s confidence level:
Certain investors have a lot of confidence in their investment decisions. They rely on their investment decisions and strategies and have faith in their knowledge of the stock market. Such investors have a positive approach toward the stock market and stay positive even when the market is not doing well.
The herd mentality:
Another type of investor does not have confidence in his own investment strategies and decisions. They rely on the investment decisions of others and follow the herd mentality. If their peers talk positively about a particular stock, they do an online Demat account opening and invest in those stocks. Such investors also take market-related news seriously and get affected by it.
Influence of market factors:
Even seasoned market investors get influenced by the prevailing market conditions when making investment decisions in the market. Events like the price changes of stock in recent times affect the investor’s perception of a particular stock.
Risk aversiveness of an investor:
Every investor has a different risk appetite. While one investor may like to keep his invested funds safe, another investor may look at risk as an opportunity for amplified growth. Such investors behave differently in times of market uncertainty. Their perception of how safe the Indian stock market is different for the same level of market risks.
Optimism about the market’s future:
Some investors are hopeful and have faith in the stock market’s future, while others are sceptical of how the market will perform in the future. Investors who are optimistic about the stock market’s future growth will stay invested for a longer time than others. They will not be restless over their invested money.
Mental accounting and analysis of investors:
Investors have different ways by which they code, categorise, and evaluate the economic outcomes of their investments. Their approach to the stock market is influenced by the analytical methods and research they use.
Loss aversiveness of an investor:
Investors may tend to prefer to avoid losses in the market than getting equivalent gains. An investor who gets gains initially in the market is more open to taking risks in the future.
A bias to availability:
Investors usually prefer to buy stocks that are more easily available than others. Several investors prefer to invest in domestic stocks over international stocks because information on domestic stocks is more widely available than on stocks from foreign markets.
The Final Word
The stock market deals with the future of money, which is why it is gaining momentous relevance in people’s financial planning. However, many investors are still worried about the security of their investments due to the volatile nature of the Indian stock market. Investors have different attitudes, desires, perceptions, awareness levels, and risk aversiveness in the stock market. An investor’s perception affects his investment decisions and his confidence in the market.
