Investment Management, AIU

Investment Management
Final Research Paper
06/04/2015
UD35131BEC43705
Jos Antonio Gil Snchez
Mutual Funds Project

Many people invest their life savings with the desire of increasing and establishing
better strategies in developing their objectives of life. The beginning of XXI century is bringing
anxiety between those who are saving part of their monthly income, due to an economic
recession that is affecting almost all countries in the world. Sadly, they have discovered that
saving accounts or CD (most common investments) are not helping them to build their life
objectives and that those lower risk investments wont convert their savings in bigger profits.
Even if people have literacy in financial education, there is a difficulty (in part based on
the lack of liquidity and the amount of capital) in getting into either money market or derivate
markets. Mutual funds are the answer to those investors, who want to build wealth and
security, who want to give away to charity, save for college education, or develop a stronger
retirement plan.
The aim of this paper is to develop a subjective and personal approach to invest
savings in mutual funds. The deliverables that will come after the investing will be those that
will create physically the objectives stated and desired. The intention is to utilize this
information as the base to start accomplishing my own real goals in life.
It was common listen my parents talking about the importance of saving money and
hard work. I started working to pay my undergraduate education, and also learn how to
manage a strict budget by saving 30% of monthly income. Later on time, a joint venture with
other friends made me invest all my savings into a new business, a bar. After a year struggling
to increase the revenue and get the break-even point, the team had to close operations. I lost
everything, and I had to start saving again. Without feeling annoyed or depressed because of
the drawback, I started again my savings with more responsibility, persistence and pledge. The
lesson, indeed, was already learned, never put all your eggs in the same basket.
Due to this undesired behavior with the big loss, I started thinking how my mindset with
investments was. Some personality tests (business personality, investor personality and
success personality test) started giving my information and description of how well prepared (or
not) I was to enter this enormous and important world of finance. Refer to Appendix 1 for
detailed information about Personality Tests. These tests confirmed information about me that I
already knew with experience. Discipline, planning and organization are high. Right now my
risk aversion present low average due to the lack of experience in investments (and the bad
past experience in business). Regardless this, with time this aversion will be eliminated,
throughout the knowledge acquired in RIT SCB while pursuing the MSF. Because the
immediate gratification is in the lowest grade, It is highly possible that I pursue sooner my
goals; I am of those who prefer invest and then enjoy. This is very important to assure a
sufficient capital amount to enjoy greater results while taking higher rate of returns (and higher
risks). The low emotional vulnerability allows me to stay calm if there is a bear market or a
collapse in economy; my age could allow me to start again with the same strength and more
determination. Also the tests describe me as a person that stays a lot under bear market or bad
economic stages. They state this arguing that I may have fear of selling stocks that will
recover and earn again, as in the past. As this could be possible, regarding that I use to think
all can get better with time, this inconvenience will be eliminated with the knowledge and
practice in this masters, and I dont consider it information to be aware of. With other Financial
Personality Test, the results were obvious, I am hoarder and amasser, which means that I am
always organized, and I work prioritizing goals (View Appendix 2 for more detailed information).
After getting more knowledge how my personality works with investments, business
and finance in general, I started watching my main important goals, which I really want to
accomplish in the time stated. These goals are divided in short term, medium term and long
term basis. Refer to Appendix 3 for a detailed table about these goals.
In the short term (after graduation in 2013, and until 2018) I pretend having different
type of savings, due primarily by work (employee) the fundraising projects and the informal
investments of the savings. The most important is called Business Opportunity. I define this
saving as one liquid investment I would use in case of any chance in investing in a new type of
business or economic situation. There are other short term goals, and are necessary to start
living all by myself (buying a 1 bedroom apartment and a new car). These goals, even I am
writing them in this paper, I dont consider them important goals since I must pursuit them all
after college graduation (its mandatory).
The medium term is very specific. My general goal here is semiretirement. While
retirement is a very familiar word, not everybody gets retired as they wanted to. Because
Retirement Plans (in my country) started in the beginning of 2000s my parent dont have a
high sum saved in retirement plan accounts, and now they also have the constraint of age,
against them. For that, I am planning to help them retire confortable, with my own savings.
In my case, my semi-retirement will consist in paying the monthly bills (electricity,
water, cellphone, cable, gas, gym, other). This will allow me feel more secure about the
present and have more time managing my own portfolio and developing better the dreams I
want to accomplish, having the most profitable Charity Organization in my country.
In the long run, my goals will have a range of different choices. Because raising a kid in
US is approximately $500,000-$650,000 (according to BabyCenter.com, College Board and
Department of Agriculture of USA), certain measures need to be defined before even getting
married. For each kid (pretending to have 3 kids) my intention is to have 1 apartment that will
cover their expenditures in college. Also, paying University Tuition will increase a lot this
investment. Because the house is the dream of every family, my goal for this is investing in
one house that will pay the loan of the house where we pretend to live. Then, acquiring the
first house and then lease / rent the house. With this monthly payment we will then buy our
house with a bank loan. Total income expected is $90,000.00
My personal full retirement will come approximately in 20-25 years. My wife and my
retirement will come just before my kids finish school. The intention is work harder in our first
years of life, and then enjoying them while they are still in home. Monthly income expected is
$2,000.00.
The last goal is for the auto maintenance of my Fundraising Organization. Due to
nonstable monthly revenue of the projects Dulces por una Causa
(www.dulcesporunacausa.org) and Una Vida de Color. Monthly income expected is
$2,000.00
But it is going to be uphill investing in different type of securities and derivates with a
restricted amount of capital collected. The total amount for investment is $100,000, and
divided by all the different types of securities, would be 10-25% for each one. This little capital
to invest wont be enough to have a diversified portfolio. We could, for instance, invest all of it
in just 1 or 2 different types of investments, but I will be again trying to beat the system. The
theory explains clearly that risk decreases as increases the diversification of the entire
portfolio. Since XIX Century the market is enjoying of a diversified portfolio with lower risks
than their individual investments. They became famous in 1980s. Called mutual funds, they
allow a group of investors to get together combining their cash and investing it in different
type of derivates or securities. My decision in using mutual funds is also based in the facility to
get in or out (buying or selling) in comparison with the other types of investments as bonds or
stocks. Because I am middle class student and employee, I wont have time to manage day to
day all the investments, but the mutual fund will manage it for me. Those are sufficient
reasons to find out about this market and investing here my $100,000 capital amount.
For all of the different investments in mutual funds companies, certain general criteria is
observer:
No selection of load funds.
Diversification of Growth in Aggressive, Moderate and Conservative.
Discard in using international mutual funds.
No consideration of inflation (nominal tax rates) and other Law restrictions.
No consideration legal status (inmigrant)
Starting investment in mutual funds: $100,000.00
No tax bracket (in the case the earning goes to a Owned Company.
No consideration of possible extra foreign taxes.
Starting with a lump-sum investment, but alter it will be used for a dollar-cost averaging
(buying when are down and selling up).
Selection of one of the top ranked Mutual Funds. Reason: The media is covering them and
analyzing their moves. They cannot take the chance of mistake.
Try to have expenses less than 1% per year.
Expenses less than 0.75
Non currency losses
According to Michael D. Hirsch, in his books Multifund Investing express the
importance of diversification and the importance of a balance portfolio. Appendix 5 is
presenting the Original description of the asset allocation. Financial Advisors in this book or
others like Mutual Funds, for the Utterly Confused strongly advice to divide the portfolio
according to the personality detail and main goals. In Appendix 6 we can observe how we will
divide our complete capital of investment of $100,000.00 (Appendix 6). Of the amount
specified, 60% will be destined to growth, 30% to income, and only 10% for liquid. The reason
is because my youth allows me to work harder and obtain higher responsibility jobs, it is now
when I have to invest in growth. The 10% of liquid will be used for the retirement of my
parents. In that way, I will let 30,000 being utilized in Income.
After deciding the asset allocation in the mutual funds, we need to start continuing
selecting and making decisions, now with the sector allocation. The aggressive growth will
help het the best of food mutual fund decisions, and also to have higher probabilities of higher
rate of returns. In that case, the risk decreases, but also decreases the rate of return,
(Conservative Growth with 25%, Equity Income within 20%, Fixed Income with 10% and Money
market just with 10%. The reason for defragmenting is due to the objectives (the intention of
having a Charity Organization in the midterm that could survive without external donations;
the retirement in 5 years (maybe less than 10) of my parents, and my own personal objectives
of a vehicle and a small apartment (both with value of 60,000 USD). Appendixes 7 and 8 will
show the complete diversification of the Personal Portfolio.
Table 1: Presents the Complete Diversification of the Portfolio.
AOTCX: Allianz Funds, Agic Emerging Markets Opportunities Fund

With a NAV of 25.20 and a YTD Total Return od 18.98, this fund in emerging markets seems
fairly competitive while not going in a long run. The recommendations are not to use more
than 3 years, because wont get competitive against the market. With a Beta of 0.99 is fairly
enough that will develop with the economy. But the economy has not presented any welfare,
and AOTCX has grown this 2012 from 21.11 to 25.19, which means that is not accurate
compare Beta. With 3 year investment, and then change to another in emerging markets.
PPCAX:
All of the investments is allocated in stocks in the American market. The rate of return, even
until 3 years, is 18%. As I stated in AOTCX, it would be inconsistent maintain it after 3 years,
cetirus paribus.
The NAV is 14.49. This company of small growth could be useful to our interests.
VCDAX:
It has a high return in comparison with others within its category. The NAV is almost 40
(39.50). The Yield is 1.1% which means its selling after.
FAZZX:
Is an income fund, non taxable. The Yield is 8.78. The expense ratio is below 1% which is
highly recommended. In certifications is above the average. The mean is 7.04 (share) and The
SD is 4.04, implying that even though could increase to 11 it could also decrease.
EVAZX:
With a NAV of 11.09, it has increasing linearly since 2003. Its a muny, which gives certainity
(recall the graph) more security but less rate of return, but constant in the time. With other
fund bonds they are making average. Born in 2008, the Rate of return of this is fairly enough in
comparison with the market, and present average.
At the end it doesnt matter which company you choose for investing your funds.
Mutual Funds is the best decision used since 70s for investing in any capital regulated market
without having enough funds that could allow that. It responds to the EMH rule, and you are
working under the same conditions that other markets, information is available for everyone.
The only problem is when you choose international investing. There are some markets that
are not regulated as USA, UK or other developed Nation market. For instance, deciding in
investing in one non so regulated market could get me in trouble. Thats why I have made the
best decision since the beginning, organize my capital (100,000) according my expectations.
In my opinion, it does not matter if there are other mutual funds with higher rate of
returns and less risky. My decision is based in my personality test, in what I can handle and in
the trust that small mutual fund firms will develop better that higher mutual funds firm. In this
case, is not my logic who worked to make that decision, but my emotions. I do believe that
small firms work with better efficiency due to their desire in converting one day in one of the
big tier, or USA or the world.
Before finishing, I would highly recommend to understand the Table 1. Charts talk
more than words. The only thing missing in this document is the taxes that I will pay regarding
I am an international student. But I will start looking forward this investing (and obviously, the
amount).
Appendix 1
Investor Personality Test
PERSONALITY FACTORS
Conscientiousness : High
Emotionality : Very Low
Extraversion : High
Openness : Very High
Agreeableness : Above Average
BIAS REPORT
Confidence Biases
Overconfidence : Below Average
Over-Optimism : Above Average
Risk-taking Biases
Risk Aversion : Very Low
Emotional Vulnerability : Low
Impulse-control
Self-discipline : High
Immediate Gratification : Below Average
Excitement-seeking : Low
Intellectualism
Intellectualism : Very High
Herding
Trend-following : Above Average
Investor Personality Test
PERSONALITY FACTORS
Conscientiousness describes your relative ability to plan and organize towards

achieving goals and to exercise self-control.
You scored in the HIGH range for conscientiousness. Intelligent activity

involves contemplation of long-range goals, organizing and planning routes to
these goals, and persisting toward one's goals in the face of short-lived
impulses to the contrary. You can achieve high levels of success through
purposeful planning and persistence. You are likely to be positively regarded
by others as intelligent and reliable. On the down side, some people may see
you as rigid or perfectionistic.
Emotionality : Very Low
Emotionality is characterized by stress-sensitivity and more frequent

experiences of negative emotions than others.
You scored in the LOW range on emotionality. You are relatively more calm,
emotionally stable, and free from persistent negative feelings when compared
to high scorers. Freedom from negative feelings does not mean that you
experience more positive feelings. You may be reckless in dangerous
situations and take more risks than others (sometimes without knowing that
you are doing so). In general you are probably secure, hardy, and relaxed even
under stressful conditions.
Extraversion : High
Extraversion is characterized by a desire to socialize and a tendency to

optimism. Extraverts derive energy from interactions with others, while
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introverts' interests are fueled by introspection.
You scored in the HIGH range on extraversion. You probably enjoy being with
people, are full of energy, and often experience positive emotions. In groups
you are likely to talk, assert yourself, and draw attention. In general you are
outgoing, active, and joyful.
Openness : Very High
Openness to new experiences describes a willingness to experiment with

tradition, to seek out new experiences, and to think broadly and abstractly.
You scored in the HIGH range on openness. You are intellectually curious and
tend to be, compared to closed people, more aware of your feelings. You
probably tend to think and act in individualistic and nonconforming ways. Open
and closed styles of thinking are useful in different environments. An open
intellectual style may serve you well as a psychologist, professor or investor.
Research has shown that closed thinking is related to superior job performance
in police work, sales, service occupations, and short-term trading.
Agreeableness reflects a concern with cooperation and social harmony.
You scored in the NEAR AVERAGE range on agreeableness. You are likely to
balance a healthy skepticism about others' motives with a desire to cooperate
and get along. You are willing to extend yourself for others and compromise,
but you may prefer that they first demonstrate good will.
BIAS REPORT
Confidence Biases
"Mutual fund managers, analysts, and business executives at a conference
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were asked to write down how much money they would have at retirement and
how much the average person in the room would have. The average figures
were $5 million and $2.6 million, respectively. The professor who asked the
question said that, regardless of the audience, the ratio is always
approximately 2:1."
~ Whitney Tilson (Fool.com)
Overconfidence refers to the tendency to see oneself and one's abilities as

better than they actually are. Specifically, overconfident investors misinterpret
the accuracy and importance of their information (what they know) and
overestimate their skill in analyzing it. Additionally, overconfidence results in
a tendency to underestimate investment risk and to have higher turnover.
Men are more likely to be overconfident than women, and young adults are
more likely to be overconfident than older adults. Ironically, "experts" are more
overconfident than lay-people, as they often overweigh the predictive power of
their own models. Additionally, more difficult decisions (e.g. forecasting the
market) inspire more overconfidence in forecasters.
"Who has confidence in himself will gain the confidence of others."
~ Leib Lazarow
Overconfidence can be destructive in investing, where a belief in one's

superiority does not translate into bigger profits. However, overconfident
financial planners have been found to attract more business than lessconfident rivals, even while having lower overall performance than their
colleagues. In many business endeavors, overconfidence both attracts more
clients and leads to greater overall risk-taking. However, in investing,
overconfidence can lead to long-term underperformance if it is not balanced
by experience.
HIGH SCORERS:
"Before you attempt to beat the odds, be sure you could survive the odds beating you."
~ Larry Kersten (author and sociologist)
If you are a high scorer, to balance your potential for overconfidence in investing, you
should:
1. Practice humility. No matter how well you have been investing, you can suffer
losses if you approach the markets with arrogance about past profits or
entitlement to new ones. Every day consider the possible market risks, and
actively seek out new ones.
2. Think before you leap. If you have a problem acting too quickly on your
private information, then deliberately pause for a brief cooling-off period
between having a strong opinion about the market and executing it.
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Remember, there will always be more opportunities.

3. After a string of wins, be careful of feeling that you're invincible. It's usual,
after a series of wins, to feel "on top of the world." However, beware of taking
on excessive risk or leverage at these times. Overconfident hubris is the result
of a string of wins, and it nearly always leads to big losses.
4. Engage in a more thorough evaluation of your investment plans. In particular,

remember to look at historical parallels and to perform adequate historical
analysis of your investment ideas.
LOW SCORERS:
If you are a low scorer, you are more likely to be realistic about your investment
knowledge and expected returns. However, you may be susceptible to the following if
you are underconfident (In the very low range):
1. Underconfident investors may be too afraid of potential losses to pursue
opportunities. To combat underconfidence, list and be grateful for your
accomplishments. Remind yourself, with evidence, that you are capable and
competent. Sometimes underconfidence is a real result of knowing less than
others about investing. In that case, be sure to gain the appropriate education
and experience before taking risk.
2. Some underconfident investors are hyperaware of risks. In this case, you

should review historical investment information and notice if you are
overweighting negatives and overlooking positives. Your challenge is to
develop a realistic appraisal of risks and your ability to handle them. It is
possible that you have a greater ability to manage risk than you believe.
"For myself I am an optimist - it does not seem to be much use being anything
else."
~ Sir Winston Churchill, 1954.
Optimism refers to the rose-colored lenses through which high-scorers view

the world. Optimism is associated with "confidence" biases because many
people who are overly optimistic overestimate their chances of success (as in
overconfidence). Yet optimistic people do not typically take excessive risks.
They are likely to take calculated, moderate risks. In fact, optimistic people
would not want to risk losing a sum of money large enough to depress their
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mood.
Optimistic people often avoid negative information and seek out evidence
confirming their positive outlook. This search for positive confirmation is a type
of denial, On the flip-side of optimism is pessimism, which characterizes lowscorers.
As with the other confidence "biases," optimism benefits businesspeople,

politicians, and other professionals whose ability to attract business often
depends on their attitude. However, in the financial markets, excessive
optimism can lead to superficial analysis and denial of important, negative
evidence. One potential result of over-optimism is not saving adequately for
retirement. One financial planner said: "It's the ornery, suspicious people who
save the most for retirement. The happy ones just figure everything will be
okay, and when they near retirement, they come to me, and I have to help
them ratchet down their expectations."
The optimistic investor may find himself holding excessive risk in his portfolio
while denying evidence of growing dangers. Many optimistic investors who
believed in the "New Economy" and the outstanding growth potential of internet
stocks found themselves over-exposed to the volatile technology sector in late
2000 and 2001. It was common to hear over-optimistic pundits urging investors
to stay the course (or "dollar-cost average") in their technology stock
investments in late 2000 and 2001.
Optimistic people tend to be resilient. Additionally, optimistic people often

believe that "everything is going to work out for the best," which fosters
energetic activity and success in many areas of life.
"For myself I am an optimist - it does not seem to be much use being anything
else."
HIGH SCORERS:
If you are a high scorer, you are optimistic. You tend to see the glass as "half-full,"
and you generally see a positive future ahead for you and the world. Your optimism is,
in general, a great gift. However, in your investing, you should be careful:
1. Don't believe the hype. You are more susceptible to believing a good story.
Remember, a good company does not make a good stock. Only invest when
you can look through the buzz at the underlying fundamental data.
2. Most investors stop paying attention to risks when things are going well.
Because of your higher level of optimism, you are more susceptible to ignoring
investment risks during winning streaks than others. Be sure to seriously
investigate the potential risks of your investments as often as appropriate.
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3. Budget extra money. Save more than you think you'll need for business
projects and retirement. Youre likely to underestimate the money you'll need in
retirement, and medical studies show that you're likely to live longer than
pessimists.
LOW SCORERS:
"My pessimism extends to the point of even suspecting the sincerity of other
pessimists."
~ Jean Rostand (1894 - 1977)
If you are low scorer, you are generally pessimistic. The following pointers may help
improve your peace-of-mind and profitability:
1. Because of your extra attention to negative details, you may avoid investing
when you perceive signs of danger, regardless of the opportunities that are
present. Try to maintain an awareness of your negative emotions. When you
are more negative, it may actually be a good time to look for opportunities and
to take some risk. Be aware of this paradox, and consider using a journal to
document your mood, the events that affect your mood, and your resulting
mood-related decisions, every day.
2. You may take losses personally. After a series of losses, you may become
excessively pessimistic and risk averse. Be aware of these tendencies. When
you feel like selling out your riskier positions, revisit your plan. Be sure to
review your strategy's historical performance to boost your long-term
confidence.
3. Avoid checking your investment performance, except at predefined intervals.

Frequent checking leads to negative emotional reactions (and resulting bad
decisions) when positions are going against you (which they often will be).
Risk-taking Biases
Risk Aversion : Very Low
Risk Aversion
"You get recessions, you have stock market declines. If you don't understand that's
going to happen, then you're not ready, you won't do well in the markets."
~ Peter Lynch
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Risk aversion refers to an excessive fear of risk-taking. Risk aversion can

trigger investor hesitation, indecision, and analysis paralysis. Many investors
with high risk aversion experience difficulty "pulling the trigger" in volatile
markets.
Some investors experience risk aversion as waiting for confirmation.

Unfortunately, waiting for expected price movement erodes profits. Indulging
the inclination to delay can precede impulsive entries and exits later on.
When investing without adequate due diligence, risk aversion is appropriate.

Investors should do background research to gain confidence. Sometimes
losses are due to random events, and in those cases it is helpful to understand
the laws of probability and the inevitability of draw-downs (an understanding
derived from having a solid investment philosophy).
HIGH SCORERS
1. High risk aversion can be managed in several ways. Amateur investors who
have high risk aversion should probably entrust their money to a trusted
professional (such as a financial advisor). Most advisors will take an
appropriate amount of risk for the long-term growth of your portfolio, and high
scorers will not have to worry about the best course of action to take with their
assets.
2. As with many of the volatility-sensitive profiles above, risk averse investors
should check the value of their portfolios as infrequently as possible.
3. Confidence can be built with market experience, gradual exposure to market

risk, education, and the constructive challenging of one's fears.
LOW SCORERS:
1. Very Low scorers should beware of taking excessive risk. But in combination
with adequate self-discipline, education, historical knowledge, experience,
and preparation, a low score on risk aversion is usually beneficial for
investors.
"Success in investing doesn't correlate with I.Q. once you're above the level of
25. Once you have ordinary intelligence, what you need is the temperament to
control the urges that get other people into trouble in investing.
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~ Warren Buffett
The Buffett quote above indicates that the ability to manage your impulses,
particularly those stemming from emotion, leads to greater investment
success than intelligence alone.
If you are a high scorer on emotional vulnerability, you are likely to experience
panic, confusion, and helplessness when under pressure or experiencing
stress. If you are a low scorer, you feel more poised, confident, and clearthinking during stressful times.
"We simply attempt to be fearful when others are greedy and to be greedy only
when others are fearful."
~ Warren Buffett
Buffet can maintain a long-term perspective during emotional periods in

the markets. As a result, he can go against the prevailing market sentiment
(and thus take advantage of mis-pricings). Such emotional stability is essential
in order to find bargains during periods of market volatility.
HIGH SCORERS:
1. Practice self-awareness. It is important for high-scorers to know when they
are in a negative emotional state without awareness, they cannot take action
to halt the destructive effects of negative emotions or take advantage of
negativity in the markets. Meditation and yoga help practitioners identify and
objectively reflect on reactive emotional states. Vigorous exercise can also
increase your stress tolerance.
2. Check your investment prices as infrequently as possible. Checking position
progress too frequently stimulates emotional reactions without giving useful
information.
3. Stick to a defined money management plan. Know your entry and exit points
in advance. Have clearly defined buy and sell signals. (These concepts are
easy to acknowledge, but during periods of market volatility you will have
trouble following them - know this).
4. Avoid short-term trading if possible. You are vulnerable to emotional burnout from rapid trading. You will probably benefit from using an investment style
that fits your more stress-sensitive personality.
LOW SCORERS:
1. 1. You are probably more calm than most during market volatility. Nonetheless,
become aware of the triggers for negative emotional states during investing. If
emotions are a problem for you, then see the recommendations above and
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consider whether you can adapt your investing style to accommodate.
Cutting winners short : Below Average
"Selling companies that are doing well and purchasing ones that are faring poorly is like
watering the weeds and cutting the flowers."
~ Peter Lynch, Fidelity Investments
"Our favorite holding period is forever."
~ Warren Buffett
J.R. Simplot is an 8th grade drop-out and a self-made multi-billionaire. He

made his fortune through saavy investments in potato farming and french fry
production. Currently he owns the largest ranch in the United States, the ZX
Ranch in southern Oregon. His ranch is larger than the state of Delaware.
Despite his tremendous wealth, Simplot is a modest man. He describes his
accumulation of wealth to Eric Schlosser (author of Fast Food Nation):
"Hell, fellow, I'm just an old farmer got some luck," Simplot said, when I asked
about the keys to his success. "The only thing I did smart, and just remember
this - ninety-nine percent of people would have sold out when they got their first
twenty-five or thirty million. I didn't sell out. I just hung on." [bold added]
In general, most people sell their winning investments too soon ("cutting
winners short"). According to some experts, selling winning investments too
soon is a result of "seeking pride." Others believe that cutting winners short is
related to obsessiveness. The truth is a mix of both. Everyone is susceptible
to this bias to some extent.
If you are a HIGH SCORER or are guilty of cutting your winners short, you
should:
1. When you feel yourself becoming worried about a winning position,

don't impulsively sell. Instead re-evaluate your selling criteria. Did
the investment meet your profit target? Has something fundamental
changed about the security that indicates you should sell now?
2. Be prepared for your short-term winners to give back some of

their gains. Reversals are very common after a rapid, large price rise,
especially when it is unsupported by news.
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Impulse-control
"One trait that was shared by all the traders is discipline."

~ From "Wizard Lessons", Stock Market Wizards
Self-discipline is what many people call will-power. Self-discipline refers to

one's ability to persist at difficult or unpleasant tasks until they are
completed. People who possess high self-discipline are able to overcome
their reluctance to begin tasks and can stay on track despite distractions.
Low scorers are more likely to procrastinate and show poor follow-through
on their plans. Impulsive trading, erratic performance monitoring and ignoring
investment positions for long periods are all characteristic of traders with very
low scores.
In a survey of 200 currency traders in continental Europe, self-discipline was

rated the second most important factor in trader success. (The most
important factor was quick reaction time). In a study of the psychological
factors correlated with financial success, self-control (a close relative of
discipline) was the most significant factor.
Self-discipline supports many of the habits that together contribute to success.

One of those habits is the ability to meticulously analyze ones performance.
What factors led to a successful business decision? What happened to cause
an unanticipated loss? Self-discipline is necessary for collecting and organizing
this information.
Disorganized investors can often compensate for low self-discipline by hiring

disciplined professionals to work with, or for, them.
LOW SCORERS can understand the value of self-discipline using the following
techniques:
1. In order to build self-discipline, start by getting motivated. Notice the
importance of discipline in your life and the areas where a lack of selfdiscipline has come between you and your goals. For example, if there
is little consistency between your stated intentions and actions (E.g.,
you dont meet confirmed deadlines), then you may be considered
unreliable and even untrustworthy by others.
2. Practice being "your word." When you say you that will do
something, then you have made a commitment. Keep your
19
commitments. A good way to start is to always be on time. A hallmark

of undisciplined people is being late to appointments.
3. Don't get ahead of yourself. If you have low self-discipline, then
address this problem with small, do-able steps. It takes time to
become more disciplined, and it will only happen if you truly feel that it
is a priority.
4. In business, its important to be able to understand and plan for various

contingencies before becoming committed. Practice thinking in this
way.

""Business opportunities are like buses, there's always another one coming."
~ Richard Branson
Immediate gratification is the preference for small, immediate rewards over

larger, more distant rewards. People who eat dessert first are giving in to
immediate gratification urges. Impatience and impulsiveness are characteristic
of high-scorers.
Greed is a close cousin of excitement-seeking. Greed is often described as

"excessive desire" for money or valuables. Anyone who has experienced the
feeling of greed can relate to that pressured, desperate need to get more
money NOW. People who are high in immediate gratification are more likely to
engage in gambling behavior (taking inappropriate risks), and they are more
likely to experience a greedy state of mind when evaluating potential
investments.
Bill Miller, Chairman of Legg Mason Capital Management, beat the S&P 500
index every year for 15 consecutive years (from 1991-2005). When interviewed
by the Wall Street Journal in January 2005, "Bill Miller Dishes on His Streak
and His Strategies," he attributed his success to a very simple concept: "The
biggest opportunity for investors is really thinking out longer term... So we tried
to adjust the construction of our portfolio to reflect the neglect that analysts and
portfolio managers have given to those factors. Our turnover rate has dropped
significantly as we've tried to lengthen our time horizon."
Investors who score highly here should try to perform adequate up-front
research and cultivate patience when investing.
HIGH SCORERS may find the following helpful:

1. 1. Remember Bill Miller and Richard Bransons quotes above. Patience
is a cardinal virtue of investors. Another perfect stock or setup will
always come along. It is financially unhealthy to chase performance.
2. 2. As Bill Miller describes, widen your time-perspective. This is
20
especially useful when feeling a need to perform. Looking ahead at

farther horizons or larger-scale charts can diminish your urge to make
impulsive decisions now.
"The individual investor should act consistently as an investor and not as a speculator.
This means... that he should be able to justify every purchase he makes and each price
he pays by impersonal, objective reasoning that satisfies him that he is getting more
than his money's worth for his purchase."
~ Benjamin Graham
Excitement-seeking describes the tendency to pursue emotionally arousing

activities. Excitement-seeking is seen in investors who make large bets more
for the thrill of the gain than an understanding of the game. Note that
prudent, calculated excitement-seeking is seen in most successful investors.
The difference between successful and unsuccessful excitement-seekers is

that the successful ones are more excited by a good decision than a large
financial outcome. They realize that excellent research, organization,
management, and execution lead to profit. They value the game more than the
material rewards that will accrue from playing it well.
Richard Branson, the Billionaire British entrepreneur, is well known for his
adrenaline-raising antics to promote his various businesses. He argues that fun
is necessary to his work:
"A business has to be involving, it has to be fun, and it has to exercise your
creative instincts."
~ Richard Branson
A problem arises when your investing is all about fun, with profits only
secondary. It is important that you enjoy investing, but it is also crucial that you
not invest purely for the sake of that enjoyment. Rather, you ought to enjoy
making profits as a result of following your investment plan.
Intellectualism
Intellectualism : Very High
21
"An intellectual is a man who takes more words than necessary to tell more than he
knows."
Dwight D. Eisenhower (1890 - 1969)
Intellectual investors enjoy investigating complex concepts and abstractions.

In general, intellectualism is a good thing for investors. High intellect underlies
ones curiosity about new investment ideas, and most great investors are
intellectual.
However, without a disciplined and experienced mind, high intellectualism may

lead to gathering "too much information" and "over-thinking." A hallmark of
the excessively intellectual investor is the use of unnecessarily complex
assumptions and methodologies.
Psychological research demonstrates that gathering more than 3 pieces of

relevant information about any one decision leads to deteriorating decision
quality. Apparently, analyzing too many independent details leads to eroded
profitability.
Investors who are low scorers on intellectualism can more easily remain
focused and without distractions or tangents in their thinking, but they are less
sensitive to new ideas and opportunities. In contrast to investors, many
successful traders score below average on intellectualism.
Very low scorers may not feel curiosity about new business ideas, which can
reduce their performance if market conditions change.
HIGH SCORERS:
"Nothing contributes so much to tranquilizing the mind as a steady purpose - a point on
which the soul may fix its intellectual eye."
Mary Wollstonecraft Shelley (1797 - 1851)
1. Highly intellectual investors may have trouble with mind wandering. Their
endless curiosity about new business concepts or models may hamper the
disciplined management of their investments.
2. Notice if you are "missing the forest for the trees." Successful business
doesn't have to be difficult or complicated. Many people consistently profit with
businesses that appear simple, but which are based on tried-and-true
principles.
LOW SCORERS:
22
1. Consider using investment strategies developed around simple concepts that

make sense to you. Low scorers perform best when methodically studying
tried-and-true methods.
2. Cultivate curiosity about the investment universe. Remember to be aware of

the larger economic trends that may impact your investment specialty.
Herding
Trend-following : Above Average
"Men, it has been well said, think in herds; it will be seen that they go mad in herds,
while they only recover their senses slowly, and one by one."
~ Charles MacKay (1841) Extraordinary Popular Delusions And The Madness Of
Crowds
Trend-following refers to one's tendency to follow the crowd, relying on others

for leadership and critical thinking. Trend-following can be profitable for
investors (though many contrarians would disagree), provided that they
recognize signs of trend formation and dissipation. Momentum investors are
an example of trend-followers.
"Never, Ever Listen to Other Opinions.
To succeed in the markets, it is essential to make your own decisions.

Numerous traders cited listening to others as their worst blunder. Walton and
Minervini lost their entire investment stake because of this misjudgement."
~ Jack Schwager, Stock Market Wizards, Wizard Lessons #29
Contrarians score low on trend-following. Contrarians tend to bet against

current trends or opinion when they are identifiably incorrect. Contrarians
typically view the market consensus with suspicion, and are sometimes
described in the same sentence as value investors.
Because the many market opportunities are created by the misbehavior of the
mass of investors, an understanding of crowd psychology is useful for
investors.
"If your mind is not in gear with the markets, or if you ignore changes in mass
psychology of crowds, then you have no chance of making money trading." ~
Alexander Elder (1993) Trading for a Living
HIGH SCORERS:
23
1. Consider using a trend-following strategy in your investing, such as

momentum or growth strategies, since these may be more congruent with
your personality.
2. Avoid listening to financial media, colleagues, or market gurus (such as on

CNBC) for investment ideas. High scorers are more susceptible than most to
chasing the media or stock tip bandwagon (which is typically a very bumpy
ride).
LOW SCORERS:
1. You have the innate advantage of searching for opportunities away from the
crowd. Investing in overlooked markets or sectors may fit your personality.
Low scorers are often value investors.
2. Beware of betting against powerfully trending markets. Fading trends may be

appealing to low scorers, but doing it well requires patience, vigilance, and
knowledge of the signs of market reversals. Timing is key.
Business Personality Test

PERSONALITY FACTORS
Conscientiousness describes your relative ability to plan and organize

towards achieving goals and to exercise self-control.
You scored in the HIGH range for conscientiousness. Intelligent activity

involves contemplation of long-range goals, organizing and planning
routes to these goals, and persisting toward one's goals in the face of
short-lived impulses to the contrary. You can achieve high levels of
success through purposeful planning and persistence. You are likely to
be positively regarded by others as intelligent and reliable. On the down
side, some people may see you as rigid or perfectionistic.
Emotionality : Low
24
Emotionality is characterized by stress-sensitivity and more frequent

experiences of negative emotions than others.
You scored in the LOW range on emotionality. You are relatively more
calm, emotionally stable, and free from persistent negative feelings when
compared to high scorers. Freedom from negative feelings does not
mean that you experience more positive feelings. You may be reckless in
dangerous situations and take more risks than others (sometimes without
knowing that you are doing so). In general you are probably secure,
hardy, and relaxed even under stressful conditions.
Extraversion : High
Extraversion is characterized by a desire to socialize and a tendency to

optimism. Extraverts derive energy from interactions with others, while
introverts' interests are fueled by introspection.
You scored in the HIGH range on extraversion. You probably enjoy being
with people, are full of energy, and often experience positive emotions. In
groups you are likely to talk, assert yourself, and draw attention. In
general you are outgoing, active, and joyful.
Openness : Above Average
Openness to new experiences describes a willingness to experiment with

tradition, to seek out new experiences, and to think broadly and
abstractly.
You scored in the NEAR AVERAGE range on openness. You are

probably practical but willing to consider new ways of doing things. You
may seek a balance between the old and the new. You are able to
balance a comfort with habit, routine, and certainty with a desire for
25
novelty and ambiguity.
Agreeableness reflects a concern with cooperation and social harmony.
You scored in the NEAR AVERAGE range on agreeableness. You are

likely to balance a healthy skepticism about others' motives with a desire
to cooperate and get along. You are willing to extend yourself for others
and compromise, but you may prefer that they first demonstrate good will.
BIAS REPORT
Confidence Biases
Overconfidence refers to the tendency to see oneself and one's abilities

as better than they actually are. For businesspeople, there are both
drawbacks and benefits to overconfidence.
On the downside, overconfidence results in a tendency to

underestimate financial risks and to get into financial commitments
(such as debt) that are more difficult to get out of than originally assumed.
High scorers may accumulate debts that are unmanageable, invest in
multiple schemes that never pay out, and spend money under the
assumption that they will be able to cover their expenses (even when
they have no idea how).
On the upside, high levels of confidence can be reassuring to potential

customers. Overconfident financial planners attract more clients than
less-confident rivals, even while having lower investment performance
than their colleagues. Additionally, entrepreneurs are typically
overconfident about their own abilities and likelihood of success, yet that
overconfidence is often balanced by a more realistic appraisal of the risks
that they are undertaking. In many business endeavors, overconfidence
both attracts more clients and leads to greater overall risk-taking.
Low scorers are more likely to be realistic about their financial knowledge
26
and expected returns. Low scorers are likely to engage in less

speculative spending and are likely to have less debt. At the extreme,
underconfident people may be excessively risk-avoidant with their
money.
"Before you attempt to beat the odds, be sure you could survive the odds
beating you."
~ Larry Kersten (author and sociologist)
HIGH SCORERS:
1. Pay extra attention to potential risks - you have a tendency to avoid
acknowledging these. In particular, remember to look at historical
parallels, perform adequate due diligence, and do background
research on your business plans, partners, and competitors.
2. Think before you leap: Deliberately pause for a cooling-off period
between having a bright idea and beginning to execute it. Remember that
there will always be more opportunities.
3. Practice self-awareness: Notice where a high level of confidence helps

your business (for example, with clients and customers), and where it
impairs your long-term performance (for example, in taking on excessive
debt).
LOW SCORERS:
If you are low scorer, you may be susceptible to the following if you are
underconfident (In the very low range):
1. Underconfident businesspeople may be too afraid of loss to take
necessary risks. To combat underconfidence, remind yourself of how you
have demonstrated capability and competence in the past. Your
humility is an asset in business, as you are less likely to become overextended or mis-represent your abilities.
2. Some underconfident businesspeople are hyperaware of risks. If this

describes you, then reviewing historical decisions to see if you have been
overweighting negatives and overlooking positives can help you
become more realistic. Your challenge is to develop a realistic appraisal
of both risks and your capability in managing them. It is possible that you
have a greater ability to manage risk than you believe.
27
"For myself I am an optimist - it does not seem to be much use being

anything else."
Optimism refers to the "rose-colored lenses" through which some

people view the world.
High scorers generally see a positive future ahead for themselves and
the world. Low scorers expect more negative events to unfold and may
feel less effective than high scorers.
In business, high levels of optimism facilitate success. Optimism and

enthusiasm reflect a focus on opportunity, both in relationships and
business. Further, most people like being around optimists, and their
positive attitude is contagious. Optimists are more comfortable taking
small and moderate risks, but they take fewer high-stakes gambles than
pessimists. Optimistic people tend to be resilient. They see possibility
even after a financial catastrophe, which may explain why they are more
financially successful overall (according to researchers). Additionally,
optimistic people believe that "everything is going to work out for the
best," which facilitates goal-directed activity.
Optimism can have pitfalls. High scorers are more likely to overspend
budgets and may be overly optimistic about time management (thus
missing deadlines). People who feel positive tend to avoid information
that is negative, since it may pull them out of their good feeling state. As
a result, optimists are more susceptible to denial.
Pessimists are more attentive to details, maintain a greater focus on

potential risks than potential opportunities. They can often "overlook the
forest for the trees" (missing the big picture while they are working on
detailed problems). Additionally, low scorers may be timid about
engaging in business ventures.
HIGH SCORERS:
If you are a high scorer, you generally see a positive future ahead for you and
the world. Your optimism is, in general, a great gift. However, in your business,
you should be careful to:
1. Dont Deny the Negative. Learn to seek out and understand the logic of
all opinions (including contrary opinions) about a business plan, potential
28
investment, or relevant economic events.

2. Don't believe the hype. A good story or a good company does not make
a good business. Only start or invest in a business after you have done
detailed due diligence.
3. Dont stop paying attention to risk when things are going well. You
are more susceptible to ignoring business risk during good times.
LOW SCORERS:
"My pessimism extends to the point of even suspecting the sincerity of other
pessimists."
~ Jean Rostand (1894 - 1977)
If you are low scorer, you are more pessimistic than average.
1. Maintain an objective, nonjudgmental awareness of your negative
emotions. Because of your extra attention to negative details, you may
see more threats to your wealth than opportunities.
2. Consider using a journal to document your mood, and the events that
affect your mood, every business day. It can be helpful to cultivate
optimism by deliberately re-focusing on the positive when you find
yourself dwelling on the negative. Optimism can be learned using such
techniques.
3. You may take losses personally. After a business disappointment, you

may become excessively pessimistic and risk averse. Yet though
perseverance you can prove your pessimism wrong. If you continue to
pursue opportunities, you will find success sooner rather then later.
Risk-taking Biases
Risk Aversion : Below Average
"You get recessions, you have stock market declines. If you don't understand
that's going to happen, then you're not ready, you won't do well in the markets."
~ Peter Lynch
Risk aversion refers to an excessive fear of risk-taking. Risk aversion

usually results in hesitation, indecision, low confidence, and analysis
paralysis. Many businesspeople with high risk aversion experience
difficulty in execution. It is common among businesspeople who have
29
recently suffered large losses or setbacks.
Sometimes risk aversion is appropriate, especially when one has little

information or experience in a high-stakes business decision. In these
cases, doing more due diligence, looking at historical parallels, and
discussing the situation with experts can help one better understand the
risk.
Very Low scorers should beware of taking excessive risk. But in

combination with adequate education, historical knowledge, experience,
and preparation, a low score on risk aversion can be beneficial for
businesspeople.
High scorers on emotional vulnerability experience panic, confusion,

and helplessness when under pressure or experiencing stress. Low
scorers feel more poised, confident, and clear-thinking during stressful
times.
People who are emotionally vulnerable are more likely to experience

impulsive financial decision-making. Emotionally vulnerable people
are more susceptible to impulsive shopping sprees and unaffordable
luxury purchases.
Low scorers are able to control their emotional reactions to

disappointment better then high scorers. They are more likely to make
clear plans to address setbacks that they successfully follow.
HIGH SCORERS:
1. Practice self-awareness. It is important for high-scorers to know when
they are in a negative emotional state without awareness, they cannot
take action to halt the destructive effects of negative emotions. Meditation
and yoga help practitioners identify and release reactive emotional states.
Vigorous exercise can also be beneficial.
2. Thinking about, ruminating, or checking on negative business information
only worsens the problem. Prepare a plan to address potential negative
information in advance, otherwise you are more likely to react to it, even if
it was expected. Advance-plans reduce impulsive decisions.
3. Stick to a defined money management plan. Know your entry and exit
30
points in a business endeavor in advance.
4. Avoid a business that is rapid pace or high-stress, if possible. You will do

your best thinking, strategizing, and planning in a relaxed atmosphere.
LOW SCORERS:
1. Become aware of the triggers for negative emotional states during

business dealings. If emotions are a problem for you, then see the
recommendations above.
Impulse-control
Self-discipline is what many people call will-power. Self-discipline refers

to one's ability to persist at difficult or unpleasant tasks until they are
completed. Researchers have found that an individuals level of selfcontrol (a measure of self-discipline) is correlated with their wealth level
that is, higher wealth and higher self-control go hand-in-hand. When
undisciplined people are financially successful, it is often because they
have a disciplined person supporting them (an employee, spouse, or
assistant).
Low scorers tend to procrastinate and to show poor follow-through in

their chosen activities. Impulsive deal-making, erratic performance
monitoring, and ignoring business plans for long periods are all
characteristic of people with low scores.
Self-discipline supports many of the habits that together contribute to

success. One of those habits is the ability to meticulously analyze ones
performance. What factors led to a successful business decision? What
happened to cause an unanticipated loss? Self-discipline is necessary for
collecting and organizing this information.
LOW SCORERS can understand the value of self-discipline using the

following techniques:
1. In order to build self-discipline, start by getting motivated.
Notice the importance of discipline in your life and the areas
where a lack of self-discipline has come between you and your
goals. For example, if there is little consistency between your
stated intentions and actions (E.g., you dont meet confirmed
31
deadlines), then you may be considered unreliable and even

untrustworthy by others.
2. Practice being "your word." When you say you that will do
something, then you have made a commitment. Keep your
commitments. A good way to start is to always be on time. A
hallmark of undisciplined people is being late to appointments.
3. Don't get ahead of yourself. If you have low self-discipline, then
address this problem with small, do-able steps. It takes time to
become more disciplined, and it will only happen if you truly feel
that it is a priority.
4. In business, its important to be able to understand and plan for

various contingencies before becoming committed. Practice
thinking in this way.
"Business opportunities are like buses, there's always another one coming."
~ Richard Branson
Immediate gratification is the preference for small, immediate

rewards over larger, more distant rewards. People who eat dessert first
and those who binge are giving in to immediate gratification urges.
Impatience is characteristic of high-scorers. Businesspeople who score
highly here should beware of impulsively pursuing opportunities before
doing adequate research.
HIGH SCORERS
1. Remember Richard Bransons quote above. Patience is a
cardinal virtue of businesspeople.
2. Look at how impulsive acts are affecting your business
success. If you see real damage, then you are more likely to be
motivated to change. If needed, consider professional help, such
as from a cognitive-behavioral therapist, to help deal with this
issue.
3. Widen your time-perspective when feeling impulsive, and reorient yourself to your original plan. Looking ahead can diminish
your urge to make impulsive decisions now.
32
Excitement-seeking describes the tendency to pursue emotionally

arousing activities. Excitement-seeking is seen in risk-takers who
make large bets more for the thrill of the gain than an understanding of
the game. Prudent excitement-seeking is seen in most successful
business people.
The difference between successful and unsuccessful excitement-seekers

is that the successful ones are more excited by a good decision than a
large financial outcome. They realize that excellent research,
organization, management, and execution lead to profit. Nonetheless,
they value the game more than the material rewards that will accrue from
playing it well.
Richard Branson, the Billionaire British entrepreneur, is well known for his
adrenaline-raising antics to promote his various businesses. He argues
that fun is necessary to his work:
"A business has to be involving, it has to be fun, and it has to exercise

your creative instincts."
~ Richard Branson
Intellectualism
Intellectualism : High
"An intellectual is a man who takes more words than necessary to tell more than
he knows."
Dwight D. Eisenhower (1890 - 1969)
Intellectual businesspeople enjoy investigating complex concepts and

abstractions. In business, high intellectualism may lead to gathering "too
much information" and "over-thinking." A hallmark of the intellectual
businessperson is the use of complex analytic techniques and the
recruitment of experts for consultations.
Intellectual curiosity can be helpful, but an over-reliance on details is

distracting and potentially dangerous. Psychological research
33
demonstrates that gathering more than 3 pieces of decision-relevant

information can lead to deteriorating decision quality. Apparently,
analyzing too many independent details detracts from the overall quality
of the intuitive decision.
Businesspeople who are low scorers on intellectualism can more easily

remain focused and without distractions or tangents in their thinking.
Very low scorers may not feel curiosity about new business ideas,
which can reduce their performance if market conditions change.
HIGH SCORERS:
"Nothing contributes so much to tranquilizing the mind as a steady purpose - a
point on which the soul may fix its intellectual eye."
Mary Wollstonecraft Shelley (1797 - 1851)
1. Intellectual businesspeople may have trouble with mind wandering.
Their endless curiosity about new business concepts or models may
hamper the disciplined operation of their business.
2. Stop yourself if you think youre smarter than others (as many
intellectuals do) remember to maintain a sense of humility.
3. Notice if you are "missing the forest for the trees." Successful business
doesn't have to be difficult or complicated. Many people consistently profit
with businesses that appear simple, but which are based on tried-andtrue principles.
LOW SCORERS:
1. Use business strategies developed around simple concepts that make
sense to you. Low scorers perform best when methodically studying and
executing on basic methods.
2. Cultivate curiosity about your business environment. Maintain an

awareness of the larger economic trends that may impact your space,
as you have a tendency to overlook these until they have adversely
affected your way of doing things.
Herding
Trend-following : High
"Men, it has been well said, think in herds; it will be seen that they go mad in
34
herds, while they only recover their senses slowly, and one by one."
~ Charles MacKay (1841) Extraordinary Popular Delusions And The Madness Of
Crowds
Trend-following is a term often used in stock trading and investment. It

refers to one's tendency to follow the crowd, relying on others for
leadership and critical thinking. Trend-following can be profitable for
businesspeople, especially if they can identify a trend early in its
formation and subsequently adapt their business to the changing
demands of the marketplace. Contrarians those who bet against the
conventional wisdom often do well in the financial markets. In the
business world they can be excellent analysts, finding opportunities
where others have not thought to look.
35
Appendix 2
Amasser
If you tend to be a money amasser, you are happiest when you have large amounts of
money at your disposal to spend, to save, and/or to invest. If you are not actually
spending, saving, or investing, you may feel empty or not fully alive. You tend to
equate money with self-worth and power, so a lack of money may lead to feelings of
failure and even depression. If you hire an investment advisor or financial planner, your
major concern will be finding investments with high rates of return, since you hope to
make as much money as you can, as quickly as possible. You probably enjoy making
your own financial decisions, so it may be quite difficult for you to give up much
control to money professionals. If, on the other hand, you tend to be a worrier, too, and
if you are tired of being overly obsessed with your money, you may actually welcome
the opportunity to assign some of the details of your money life to a trustworthy
financial advisor.
Hoarder
If you tend to be a hoarder, you like to save money. You also like to prioritize your
financial goals. You probably have a budget and may enjoy the processes of making up
a budget and reviewing it periodically. You most likely have a hard time spending
money on yourself and your loved ones for luxury items or even practical gifts. These
purchases would seem frivolous to you. You might very well view spending money on
entertainment and on vacations - and even on clothing - as largely unnecessary
expenses. If you think about investing your money, you tend to be concerned not with
liquidity but with future security, especially during retirement. "Saving for a rainy day"
appeals to your orderly nature. If you are an extreme hoarder, you may want to keep
your money so close to you that you avoid putting it even in conservative investments
such as money markets, bonds, or mutual funds. Some hoarders have been known to
keep their money hidden under mattresses and in other secret places rather than put it in
a bank. However, these cases are relatively rare. Depending on how extreme your
hoarder tendencies are, you might exhibit some, most, or all of these traits.
36
Appendix 3
Investing of 100,000
Name
Description
Time
Specific Time
Business Opportunity
Capital Available for Market Opportunities and Investments
Short
1-5 years
Buy a Car
Buy a Car
Short
1-5 years
Buy a 1 Bedroom Apartment
Short
1-5 years
Medium
5 - 8 Years
Buy a 1 Bedroom
Apartment
Retirement of my parents (2 parents, 70 and 60 years old
Parents Retirements
Personal Semiretirement
now)
Monthly basic expenses (Bills (electricity, water, phones,
Medium
cable, gas, house monthly payment)
5 - 8 years
House of Family
Family permanent house
Long
10 years
3 Kids College Education
University in my country (Dominican Republic)
Long
20 years
3 Apartments for Kids Allowances during their College Time
Long
20 years
Monthly Loan Payment, Food, Gas)
Long
20 years
Monthly Expenses
Long
10 years
3 Apartments (for Kids

Allowances)
Monthly Basic Expenses + Monthly Other Expenses (Car
Personal Full Retirement

Self-Maintenance of
Charity Organization
37
Appendix 4
Name
Description
Time
Specific
Time
Managerial
Tenure
Growth
Diversity
Yes
Aggressive
No
Yes
Moderate
No
Yes
Aggressive
No
Yes
Conservative
Yes
years
Yes
Conservative
No
Long
10 years
Yes
Conservative
Yes
Long
20 years
Yes
Conservative
Yes
Long
20 years
Yes
Conservative
Yes
Capital Available for Market
1-5
Opportunities and
Business Opportunity
Investments
Short
years
1-5
Buy a Car
Buy a Car
Buy a 1 Bedroom
Buy a 1 Bedroom
Apartment
Apartment
Short
years
1-5
Short
years
Retirement of my parents (2
5-8
parents, 70 and 60 years old
Parents Retirements
now)
Medium
Years
Monthly basic expenses (Bills
Personal
(electricity, water, phones,
Semiretirement
cable, gas, house monthly
Medium
payment)
House of Family
Family permanent house
3 Kids College
University in my country
Education
(Dominican Republic)
5-8
3 Apartments for Kids
3 Apartments (for Kids
Allowances during their
Allowances)
College Time
Monthly Basic Expenses +
Monthly Other Expenses (Car
Personal Full
Monthly Loan Payment, Food,
Retirement
Gas)
Long
20 years
Yes
Moderate
Yes
Monthly Expenses
Long
10 years
Yes
Conservative
Yes
Auto Maintenance of
Charity Organization
38
Appendix 5
Asset Allocation
10%
Growth
Income
30%
60%
Liquid
39
Appendix 7
Sector Allocation of Portfolio in Mutual

Funds
Aggressive Growth
Conservative Growth
Fixed Income
Money Market
10%
10%
35%
20%
25%
Equity Income
40
Bibliography
Fearless Investing Series: MUtual Funds Workbook 1, Find the Right Mutual Funds, NJ, 2005
Hirsch, Michael D., Multifund Investing, DOw-Jones Irwin, Illinois, 1987
Petillo, Paul, Mutual Funds for the Utterly Confused, Mc Graw-Hill, NY, 1009
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2005, USA

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Investment Management

Final Research Paper

Mutual Funds Project

Table 1: Presents the Complete Diversification of the Portfolio.

AOTCX: Allianz Funds, Agic Emerging Markets Opportunities Fund

Investor Personality Test

Conscientiousness describes your relative ability to plan and organize towards

You scored in the HIGH range for conscientiousness. Intelligent activity

Emotionality : Very Low

Emotionality is characterized by stress-sensitivity and more frequent

Extraversion is characterized by a desire to socialize and a tendency to

introverts' interests are fueled by introspection.

Openness : Very High

Openness to new experiences describes a willingness to experiment with

Agreeableness : Above Average

Agreeableness reflects a concern with cooperation and social harmony.

"Mutual fund managers, analysts, and business executives at a conference

~ Whitney Tilson (Fool.com)

Overconfidence refers to the tendency to see oneself and one's abilities as

"Who has confidence in himself will gain the confidence of others."

Overconfidence can be destructive in investing, where a belief in one's

Remember, there will always be more opportunities.

4. Engage in a more thorough evaluation of your investment plans. In particular,

2. Some underconfident investors are hyperaware of risks. In this case, you

Over-Optimism : Above Average

~ Sir Winston Churchill, 1954.

Optimism refers to the rose-colored lenses through which high-scorers view

As with the other confidence "biases," optimism benefits businesspeople,

Optimistic people tend to be resilient. Additionally, optimistic people often

~ Sir Winston Churchill, 1954.

3. Avoid checking your investment performance, except at predefined intervals.

Risk aversion refers to an excessive fear of risk-taking. Risk aversion can

Some investors experience risk aversion as waiting for confirmation.

When investing without adequate due diligence, risk aversion is appropriate.

3. Confidence can be built with market experience, gradual exposure to market

Emotional Vulnerability : Low

Buffet can maintain a long-term perspective during emotional periods in

consider whether you can adapt your investing style to accommodate.

Cutting winners short : Below Average

J.R. Simplot is an 8th grade drop-out and a self-made multi-billionaire. He

1. When you feel yourself becoming worried about a winning position,

2. Be prepared for your short-term winners to give back some of

"One trait that was shared by all the traders is discipline."

Self-discipline is what many people call will-power. Self-discipline refers to

In a survey of 200 currency traders in continental Europe, self-discipline was

Self-discipline supports many of the habits that together contribute to success.

Disorganized investors can often compensate for low self-discipline by hiring

commitments. A good way to start is to always be on time. A hallmark

4. In business, its important to be able to understand and plan for various

Immediate Gratification : Below Average

Immediate gratification is the preference for small, immediate rewards over

Greed is a close cousin of excitement-seeking. Greed is often described as

HIGH SCORERS may find the following helpful:

2. 2. As Bill Miller describes, widen your time-perspective. This is

especially useful when feeling a need to perform. Looking ahead at

Excitement-seeking describes the tendency to pursue emotionally arousing

The difference between successful and unsuccessful excitement-seekers is

Intellectual investors enjoy investigating complex concepts and abstractions.

However, without a disciplined and experienced mind, high intellectualism may

Psychological research demonstrates that gathering more than 3 pieces of

1. Consider using investment strategies developed around simple concepts that

2. Cultivate curiosity about the investment universe. Remember to be aware of

Trend-following refers to one's tendency to follow the crowd, relying on others

"Never, Ever Listen to Other Opinions.