Want to be a better investor? It’s (almost) all in the mind.

livemint.com:

Psychology has always intrigued mankind, not only because of its complexity but also its effect on our daily lives and the world as a whole. It affects not only our relationships with family and friends but our relationship with money as well. Recently, a lot of research has been conducted about human beings’ attitude towards money in general and investing in particular. This subject, at the intersection of investments and human psychology, is known as behavioral finance. 

But long before behavioural finance became a fancy term in the worlds of academia and finance, economists and fund managers Bailard, Biehl and Kaiser proposed their own ‘five-way model’ in 1986, defining distinct investor profiles based on their level of confidence and their actions.

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They divided investors into five categories: celebrity, adventurer, individualist, guardian and straight arrow. Let's understand them one by one. 

While this framework has its constraints, it gives us an opportunity to introspect on our behaviour as an investor. According to me, every investor should look at the following aspects:

Our quest for an optimised portfolio is always a function of how we approach investing. In today’s world, access to information and data is becoming easier day by day. In such a world, it should be easier for a person with an analytical bent of mind and a holistic decision-making process to generate higher-than-average returns. But that’s not always the case. 

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So while the contribution of knowledge is well acknowledged in managing portfolios, the contribution of a person’s emotional