Behavioral Finance and Investor Types: Managing Behavior to Make Better Investment Decisions

Chapter 10

The Independent

Name of Behavioral Investor Type: Independent

Basic Orientation: Engaged in the investment process and opinionated on investment decisions.

Dominant Bias Type: Cognitive, relating to some pitfalls associated with doing one's own research.

Impactful Biases: Confirmation and Availability

Investing Style: Active

Level of Risk Tolerance: Generally above average but not as high as aggressive investors.

An Independent Behavioral Investor Type describes investors who have original ideas about investing and like to get involved in the investment process. Unlike Followers, they are not disinterested in investing and are quite engaged in the financial markets, and they may have unconventional views on investing. This “contrarian” mindset, however, may cause Independents not to believe in following a long-term investment plan. With that said, many Independents can and do stick to an investment plan to accomplish their financial goals. At their essence, Independents are analytical, critical thinkers who make many of their decisions based on logic and their own gut instinct. They are willing to take risks and act decisively when called upon to do so. Independents can accomplish tasks when they put their minds to it; they tend to be thinkers and doers as opposed to followers and dreamers.

Unfortunately, some Independents are prone to biases that can torpedo their ability to reach goals. For example, Independents may act too quickly, without learning as much as they ...