Still kicking yourself over staying too long in the market — or for pulling out too soon? Ease up. John R. Nofsinger, author of Investment Blunders (of the Rich and Famous) and What You Can Learn from Them (Financial Times/Prentice Hall), says some investing screw-ups are the result of good ol’ human nature.

AW: Your field is “behavioral finance.” Please define.
People don’t always behave rationally when trying to maximize wealth. So we look at what happens when feelings and psychological biases get involved in financial decision making.

AW: Why do we do let emotions mess up our investments?
We want to feel good about ourselves. If we sell a losing stock, we have to admit that we picked a loser.

AW: You also warn against seeking patterns in the market. But isn’t that a logical thing to do?
There’s no theory or reason to believe that what has happened before will be projected forward. These things are random.

AW: What is “anchoring,” and why is it a problem for investors?
Suppose you buy a stock at $10, and it runs up to $90. Then it starts to drop. Instead of selling and taking a nice profit at $45 or so, you set an emotional anchor at $90 and hope you’ll get back there.

AW: So it’s possible to be too optimistic?
Yes. Optimists will succumb to certain emotions more than pessimists will. It doesn’t take much convincing to convince an optimist. Oddly enough, being in a bad mood can make you more analytical.