Rational investor tends to diversify their wealth among various investment avenues to maximize returns for a given risk. Investment avenues have an inherent risk associated to them and investors can either opt for high-risk avenues such as stocks, mutual funds for high return or can choose to invest in low- risk avenues such as banks, provident funds, insurance policies etc for relatively low return. Risk is intrinsic to all investment avenues and it is considered to be one of the important parameters while choosing a particular investment avenue. Behavioural finance studies individual investment behaviour by identifying and understanding the difference between the risk attached to a particular investment avenue and the way an individual perceives that risk. Recently, it has been found that the individuals’ psychological factors like moods and sentiments affect the investors’ choice of different financial assets. Moods affect the risk perception associated with the various financial assets whereas, economic environment affects the riskiness of an asset itself.