Modern portfolio theory assumes that we are rational investors and invest only in efficient and optimal portfolios that provide the maximum return for minimum risk.  The truth (as posited by Behavioural Economists)  is that we far from rational and are subject to a myriad of psychological influences and behaviours that prevent us from not only making optimal investment or business decisions, but can in some cases turn us into morons.  We buy and hold too long or buy and sell too quickly; we refuse to accept losses assuming that we will recover our money or we sell losing investments way too soon; we are overconfident about our own abilities or place too much trust in “experts”; we maintain the status quo and do nothing or we change things too frequently.  The dichotomies of investing behaviour are numerous and fascinating and have lead to creation of field of study referred to as Behavioural Ecomomics.  Each of these behaviours also has a tremendous impact on our business decisions and are discussed below: