The interaction between risk perception and investment strategy is a critical factor in shaping decision-making processes within financial markets. This paper delves into the intricate relationship between individuals' cognitive biases, emotional responses, and cultural backgrounds, and how these factors collectively influence the way risks are perceived and subsequently incorporated into investment strategies. By analyzing key theories such as Prospect Theory, Behavioral Portfolio Theory, and the impact of demographic variables, this study aims to uncover the underlying mechanisms that guide investors' risk perceptions and their implications for portfolio construction and asset allocation. The practical significance of aligning investment advice with clients' risk preferences, as well as future directions such as neurofinance and the role of AI in personalized investment strategies, are also explored. Ultimately, understanding the interplay between risk perception and investment strategy is paramount in achieving optimal financial outcomes and fostering informed decision-making in an ever-evolving financial landscape.

Risk perception, investment strategy, cognitive biases, emotional responses, Prospect Theory, Behavioral Portfolio Theory, asset allocation, financial decision-making, personalized investment advice, neurofinance, artificial intelligence.