Behavioral finance studies have shed new light on how investors make decisions. Study results from 2013, recently shared by Fidelity Investments, have illustrated the concept of regret as it relates to decision making. Investors experience “action regret” when making a poor investment decision. In contrast, they experience “inaction regret” when choosing to do nothing when given an opportunity to make an investment that proves to be successful.
Research has shown that, of the investors in a study who made bad investment decisions, 92% regretted that decision and suffered feelings of action regret. However only 8% who had the opportunity to choose an investment opportunity that did well, but chose not to invest, suffered inaction regret. Researchers concluded that investors are much more afraid of making a bad investment decision than they are of doing nothing and missing an opportunity.
