Question

In: Finance

Explain the behavioral versus the Strategic approaches to direct investment.

Explain the behavioral versus the Strategic approaches to direct investment.

Solutions

Expert Solution

Behavioral approach to direct investment relates to investment which is guided by the behavioural biases which is dependent upon investors behaviour rather than any strategies so when the investor feels like it should be investing into the markets whether in domestic markets or the foreign markets, He will be investing in the market and making a return in the market and he will be bound to invest more into the market so he is following a behavioral normal and it could be referred as recency norm.

strategic investment is focused at making a particular strategy whether it would be value-driven strategy or growth driven strategy for investing into various companies and then those strategies are to be adopted and then the investment is made in order to maximize the rate of return from the market. strategic investors do not follow their behaviour law and most probably they are highly rational in nature and they will be following strict stop loss and strict buying prices so they will not be guided by their behaviour in making decisions.


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