what is personal investment theory

It is also known as a motivational theory in which a person invests his time, efforts, and hard work with the hope of good returns. This theory depends on the fact that if a person has the hope to get benefits and returns then he can perform better in a particular situation.

To further elaborate your concept of personal investment theory, stay connected. We will provide you with complete information regarding personal investment theory.

Personal investment theory is highly related to a person’s creativity and motivation. This theory also describes the role of social and environmental conditions in elevating a person’s motivation level.

Facilitating conditions

PI theory is a cognitive theory that describes the person’s thoughts and beliefs in a certain condition. This theory was first formulated by Maehr and Braskamp in 1994. According to them, investment was a business-related term and is closely associated with motivation. Many factors influence a person’s motivation level. Facilitating conditions is also one of them. Facilitating conditions include all those factors that help in motivating the person’s incentives. Like it could be


If we consider human psychology, a man likes challenges and competitions. Winning a certain competition gives him satisfaction and peace of mind.

Power and excellence

Some factors play a positive role in enhancing a person’s motivation. Everyone loves leadership and authority. Excellent means gaining perfection in a certain task. Many people love to think about their tasks and become proud of them. It means these people are creative and competitive.

Financial rewards

This is the most facilitating condition that forces the person to invest. A person cannot invest in anything if he knows already that he would not get any bonus or reward out of it.

>> If it coincides with the financial rewards, you could also read here about ethical investing, which in addition to making you a profit, you will be contributing to the environment.

Sense of self

Sense of self is a personality trait that varies from person to person and has a great impact on a person’s motivation level. Sense of self describes the person’s belief system, work codes, likings, and dislikings.

Several factors can influence a person’s sense of self. This includes a person’s bonding with his relationships, his choices and goals, desires and ambitions, and his surrounding environment.

Sense of self is a very important skill considered in PI theory because it defines the person’s goals and personal decision-making power. A person can be a good investor if he possesses a strong sense of self.

Sense of self-theory depends on self-reliance, sense of purpose, and self-concept either positive or negative.

Sense of purpose.

This skill helps to define a person’s goals and ambitions. While doing any kind of business or investment, a sense of purpose is very important. Because it describes the person’s aims. Why is he investing in this company? What are his goals? Meaningful intentions are required to get success not only in the business field but in all fields of life.

This is where the investment mindset begins to develop.

Self- reliance

Self-reliance is the form of self-confidence and it describes how much a person can trust himself. Whether he can make decisions or not? Self-reliance plays a key role in motivation.


Self-concept is our thinking about ourselves. If a person perceives himself as an intelligent person, he can do everything with his self-reliance and self-confidence ability. Self-concept can be positive or negative. If a person considers himself a bad person, then it would be difficult for him to stay motivated.

Perceived goals

Without having proper perceived goals, a person cannot go for long-term investments. To set a perceived goal to do investment, a person must consider all the basic aspects like disposable income, age, and time frame. His goals must be clear, specified, relevant, time-based, and achievable.

>>what is disposable income

What are the five theories of investment?

Let’s discuss these five theories of investment.

The accelerator theory of investment

According to this theory when demand increases then investment also increases. It means when demand for a certain product is increased, more products are produced to increase revenues.

The financial theory of investment

Jorgensen’s neoclassical theory of investment

This theory describes a certain time, and how much a company plans to invest to achieve desired capital stock.

The internal fund’s theory of investment

According to this theory, an investment entirely depends on the profits level.

The profits theory of investment.

According to this theory, investment also depends on profit and non-profit levels. This theory is somewhere similar to the internal fund’s theory. High profits lead to high firm earnings.

Tobin’s Q theory of investment

According to this theory, all investments are related to the factor “Q”. This theory is related to the neoclassical theory of investment. Q ratio expresses the relationship between market values and assets’ worth.

What is the role of the theory of investments in a developing economy?

All the investment theories will enhance the investment ratios. As it provides basic data of profit or loss and other exact calculations before investing. An increase in investment will ultimately lead to economic growth.

Frequently Asked questions

What is personal investment theory and what are the 3 components of finding subjective meaning?

Personal investment theory defines the person’s motivation level to achieve certain goals. It involves three components facilitating conditions, a sense of self, and perceived goals.

What is the investment theory of creativity?

The investment theory of creativity is given by Todd lubart. According to him, creativity plays an important role in making decisions. And this investment theory of creativity says that a person buys a certain thing at a lower amount and sells the same thing at a higher amount. Creative people are good investors and they focus on the goal of “buying low“.

Why do you need to know about investment theory?

Investment theories help you to achieve this business success and to achieve various goals. Investment theories help a person to make investment-related decisions in a calculated and precise manner. There are seven types of investment theories. Each theory focuses on different parameters with a single investment goal.

Who proposed the investment theory?

By using investment theories, we can calculate the capital generated by an investment. Stanberg and lubart 2006 proposed the investment theory

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