Behavior dominates because money decisions are rarely made in a calm laboratory. Fear during a market drop, envy when friends seem to be getting rich, or overconfidence after a win can all override careful plans. Even sophisticated investors can sabotage themselves by selling at lows, buying at highs, or taking risks they never intended when conditions change.
This is why “knowing the right thing” is not the same as sticking with it. Behavioral finance has long documented these patterns—Daniel Kahneman and Amos Tversky’s prospect theory (1979) explains, for instance, why losses feel more painful than equivalent gains feel pleasurable, nudging people toward reactive decisions precisely when patience would help. [...]
