Self Investment Patterns

The review of the existing literature has enabled me to suggest few intriguing facts about retail investors’ self-sentiment drivers here.

It is a general observation that the net inflows in the stock markets are directly related to changes in the demographic structure of a country’s population and economy. The age, savings-investment patterns (in relation to income status) and amount of idle money available before a country’s households are the first prominent self-sentiment driver to retail investors. This household nature shifts to a person as he/she passes with age and enriched with experience. Generally, like a young household a young investor is mostly not savings or investment-prone. Also, it is evident from this review study that younger

Higher and more specifically professional education does also play an important role in driving retail investors’ self-sentiment. It is because it brings situational knowledge and analytical abilities to invest in the right investment products. Educated investors diversify their risks by investing in different products. Thus, optimal risk-return trade-off is achieved which make them confident and successful. Past experiences with such successes also develop their risk-tolerance in the future. On the contrary lack of education most of the times causes wrong investment decisions especially in relation to the stock market. Thus, risk-attitude and investment approach in relation to financial risk tolerance as constrained by demographic characteristics and emotion and psychological biases could be an issue to future researchers to investigate

Mood variations, disturbed states, psychological biases like overconfidence cause pessimism and inattentiveness to information and time signals and thereby cause irrationality and wrong investment decisions by retail investors. All these cause overreactions, follows by over-trading, which is followed by losses and withdrawals from the stock markets. Gender also takes the centre-stage as men are more overconfident than females. Retail investors’ behaviors like herding can also cause speculative bubbles to emerge in the stock markets. Psychological biases like representativeness and conservatism also cause over and under-reactions of the retail investors. However, literature suggests that with increasing age, sound financial awareness and accumulating experiences, emotion and psychological biases as self-sentiment drivers of the retail investors lose their significance as they become more perfect in perception and