Behavioral Finance and Investor Psychology
The biases that cost investors money — and how to counter them.
Taught by Dipesh Koirala · CFA, Financial Analyst
What you'll learn
- Explain prospect theory and loss aversion, and spot the disposition effect in a real portfolio
- Identify overconfidence, herding, anchoring, framing and mental accounting in your own past decisions
- Estimate how excessive trading and costs drag on long-term returns using simple compounding
- Design nudges and defaults that make good saving and investing behaviour automatic
- Write a personal investment policy statement and a pre-trade checklist
- Set rules-based rebalancing bands that take emotion out of buy and sell decisions
About this course
Why do sensible, intelligent people buy high, sell low and hold on to losing shares far too long? This beginner course in behavioral finance explains the investor psychology behind those mistakes and gives you practical tools to counter them. You will learn prospect theory and loss aversion, overconfidence, herding and fear of missing out, anchoring, framing and mental accounting, and see how nudges and choice architecture shape saving and investing decisions. Each lesson pairs research from Kahneman, Tversky, Thaler and others with plain examples from real markets, short Python illustrations and exercises you can apply to your own portfolio or pension. By the end you will have written a personal investment policy statement, a pre-trade checklist and a set of rebalancing rules designed to beat your own cognitive biases. No finance background or coding experience is required. It suits new investors, finance students and anyone who advises clients about money.
Course content
7 lessons- 1Why Smart People Make Poor Money DecisionsThe gap between the rational investor of textbooks and the real one, and why it matters for your returns.Preview
- 2Loss Aversion and Prospect TheoryWhy losses hurt more than equal gains feel good, and how that leads investors to hold losers and sell winners.
- 3Overconfidence and the Cost of Trading Too MuchHow overconfidence, illusion of control and hindsight bias lead to excessive trading and lower net returns.
- 4Herding, Bubbles and Fear of Missing OutWhy investors copy the crowd, how bubbles inflate and burst, and how to stay independent without reflexive contrarianism.
- 5Anchoring, Framing and Mental AccountingHow irrelevant numbers, the wording of choices and mental money buckets distort financial decisions.
- 6Nudges, Defaults and Choice ArchitectureHow the design of choices steers behaviour, and how to nudge yourself instead of being nudged by others.
- 7Building Rules That Beat Your BiasesTurn everything you have learned into an investment policy statement, a pre-trade checklist and rebalancing rules.