Impact of Human Psychology on Investment Decision-Making: A Study of Mutual Fund Investors

Abstract

Purpose: The purpose of this study is to investigate the impact of cognitive factors such as Herd, Representativeness, Availability, Mental Accounting, Conservatism, Familiarity, Anchoring, and Overconfidence biases on mutual fund investment decision making.

Methodology: The study used quantitative methods to evaluate behavioral factors effect on mutual fund investments. 592 questionnaires were distributed to retail investors in Karnataka using the snowball sampling technique. Of these, 543 responses were received, and 520 were valid, achieving an 87% response rate.

Findings: The result of the study revealed that cognitive factors such as herd behavior, representativeness, availability, mental accounting, conservatism, familiarity, anchoring, and overconfidence biases have a significant impact on the investment decision-making of mutual fund investors. The R-squared value of 0.616 indicates that 61.67% of the variation in investment decision-making can be explained by these cognitive factors.