Behavioral Finance and Your Portfolio

24Introduction to Behavioral Investor Types

Someone is sitting in the shade today because someone planted a tree a long time ago.

—Warren Buffett

Introduction

As we will learn in the next four chapters, there are four behavioral investor types (BITs): The Preserver, the Follower, the Independent, and the Accumulator. The first section in the chapter will be to provide background on how BITs were devised, including background on personality type theory. By understanding the framework for how each BIT was identified, you will have knowledge to more deeply understand the case studies in Chapter 29. The chapter then moves to explaining how to identify BITs and manage your behavioral tendencies, which includes a three-step process:

1. Taking a BIT orientation quiz
2. Taking a bias quiz
3. Contemplating advice on dealing with your individual type including understanding the upside and downside aspects of each BIT.

Introduction: Personality Type Theories

We will now introduce personality type theories. While there are many different theories of personality, it is important to understand exactly what is meant by the term personality. A brief definition is that personality is made up of the characteristic patterns of thoughts, feelings, and behaviors that make a person unique. In addition to this, personality arises from within the individual and remains fairly consistent throughout life. To gain an appreciation for the foundation of the concept of a behavioral investor type, it is essential ...