Behavioral Finance and Your Portfolio

25Preserver Behavioral Investor Type

Pearls don't lie on the seashore. If you want one, you must dive for it.

—Chinese proverb

Name of Behavioral Investor Type: Preserver

Basic Orientation: Loss averse and deliberate in decision making

Dominant Bias Types: Emotional, relating to fear of losses and inability to make decisions/take action

Impactful Biases: Loss Aversion and Status Quo

Investing Style: Wealth preservation first, growth second

Level of Risk Tolerance: Generally lower than average

A Preserver Behavioral Investor Type describes the investor who places a great deal of emphasis on financial security and preserving wealth rather than taking risks to grow wealth. They are guardians of their assets and take losses very seriously. Preservers are often deliberate in their decisions and sometimes have difficulty taking action with their investments, out of concern that they may make the wrong decision. They instead may prefer to avoid risk and stick to the status quo. Preservers often obsess over short-term performance (in both up and down markets—but mostly down markets), losses, and also tend to worry about losing what they had previously gained. This behavior is consistent with the way Preservers have approached their work and personal lives—in a deliberate and cautious way.

It is not uncommon to find older investors behaving in a way consistent with the above description. This is natural. As we age, behavior certainty of cash flow becomes paramount. This behavior can ...