A Conceptual Synthesis of Emotional, Cognitive, and Heuristic Influences in Mutual Fund Investment Decisions

Purpose: This article summarises emotional, cognitive, and heuristic factors on mutual fund investment decision-making that counter traditional beliefs that the investor is a rational decision maker. The model combines various behavioural constructs to determine the influence of the psychological processes on investment intention and actual behaviour. Design/Methodology/Approach: A conceptual synthesis is developed from an extensive literature review focusing on emotional triggers, cognitive distortions, heuristic shortcuts, and moderating variables, including emotional intelligence, financial literacy, and cultural context. The interdisciplinary behavioural finance literature has been used to develop insights for an integrated conceptual model. Results: The analysis shows that fear, regret, greed, and overconfidence significantly impact investor perceptions and decision-making tendencies. These emotional drives engage cognitive biases, such as anchoring, representativeness, loss aversion, and cognitive dissonance, which distort information processing. In conditions of uncertainty and mental overload, investors turn more to heuristics, including, but not limited to, herding, familiarity, and recognition-based decisions. Other moderating effects of emotional intelligence, financial literacy, and socio-cultural factors are also emphasised in the model and can moderate or enhance behavioural distortions. All these together contribute to significant non-rational decision-making by mutual fund consumers. Originality/Value: The paper introduces a coherent behaviour framework that combines emotional, cognitive, and heuristic effects, along with the essential modulator variables. It provides research propositions for empirical testing. Also, it leads to practical implications for investors, advisors, and policymakers interested in improving the quality of their decisions and minimising biases in their behaviour.