Below is an introduction to the finance sector, with a discussion on some of the ideas behind making financial decisions.

Amongst theories of behavioural finance, mental accounting is an essential principle established by financial economic experts and describes the manner in which individuals value cash in a different way depending on where it originates from or how they are preparing to use it. Rather than seeing cash objectively and equally, individuals tend to subdivide it into psychological classifications and will unconsciously examine their financial deal. While this can lead to damaging decisions, as people might be handling capital based on feelings instead of rationality, it can cause better money management sometimes, as it makes individuals more knowledgeable about their financial responsibilities. The financial investment fund with stakes in oneZero would concur that behavioural philosophies in finance can lead to much better judgement.

In finance psychology theory, there has been a considerable quantity of research and examination into the behaviours that influence our financial practices. One of the leading ideas forming our economic choices lies in behavioural finance biases. A leading concept related to this is overconfidence bias, which explains the mental procedure where people believe they understand more than they truly do. In the financial sector, this means that financiers may think that they can anticipate the marketplace or select the best stocks, even when they do not have the adequate experience or understanding. As a result, they might not take advantage of financial advice or take too many risks. Overconfident investors typically think that their previous successes was because of . their own ability instead of luck, and this can result in unpredictable outcomes. In the financial sector, the hedge fund with a stake in SoftBank, for example, would recognise the value of rationality in making financial choices. Similarly, the investment company that owns BIP Capital Partners would agree that the psychology behind money management helps people make better choices.

When it concerns making financial decisions, there are a group of theories in financial psychology that have been developed by behavioural economists and can applied to real world investing and financial activities. Prospect theory is an especially well-known premise that describes that individuals do not constantly make logical financial decisions. In many cases, instead of taking a look at the total financial outcome of a circumstance, they will focus more on whether they are acquiring or losing money, compared to their beginning point. One of the main points in this theory is loss aversion, which triggers people to fear losings more than they value equivalent gains. This can lead financiers to make poor choices, such as holding onto a losing stock due to the mental detriment that comes with experiencing the decline. People also act differently when they are winning or losing, for example by playing it safe when they are ahead but are willing to take more risks to prevent losing more.