Assessing the Impact of Heuristics and Personality Traits on Stock Investment Decisions

This research study investigates the impact of heuristics and personality traits on stock investment decisions among individual investors in Bengaluru. Behavioral finance and personality psychology provide the theoretical framework, focusing on how cognitive shortcuts (heuristics) and the Big Five Personality Traits (Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism) influence investor behavior. The study utilizes a structured questionnaire administered to a sample of 115 individual investors. Descriptive statistics were used to examine demographic profiles, personality traits, and heuristics, while factor analysis identified underlying components driving investment decisions. The results reveal that personality traits, particularly Conscientiousness and Extraversion, significantly influence stock investment decisions, as do heuristics like overconfidence, anchoring, and availability. Investors exhibiting high levels of conscientiousness tended to make more organized, long-term decisions, while extraverted individuals demonstrated a preference for social cues and potentially riskier investments. Heuristics such as overconfidence led to excessive risk-taking, as investors overestimated their ability to predict market movements. The study confirms that both personality traits and heuristics interact to shape investment strategies, offering practical insights for financial advisors and individual investors to tailor their approaches. These findings underscore the importance of integrating psychological factors into investment strategies, which can lead to more informed decision-making and improved financial outcomes. Future research should explore how these psychological factors interact with external market conditions to further understand investor behavior.