Bailard, Biehl And Kaiser Five-Way Model

  

What a provocative title, to say the least. One's mind leaps to the lewd and rambunctious. Like a ‘60s Fishbowl Party.

But BBKFW is a financial term. We usually think of investors as comprising either winners or losers, occasionally tossing the adjective "big" onto the loser term. Bailard, Biehl and Kaiser felt the need to build upon that brief description. They came up with a five-way model as a way to categorize investors (the Meyers-Briggs of investors?):

Individualists - Confident and careful do-it-yourselfers.

Adventurers - Big risk takers, all in on one investment, no diversification.

Celebrities - Trend followers with no expertise or opinion, approach investment managers frequently.

Guardians - Lack confidence in themselves and the markets, emphasis on safety of the capital, lean toward government securities and guaranteed return investments.

Straight arrows - split personalities, exhibit extreme carefulness and impetuousness.

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finance a la shmoop. what is fund diversification and why is it important?

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well ever hear the phrase don't put all your eggs in one basket ? yeah if you do

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and there's a pothole, well, this can happen. had she put a few eggs here [woman drives car]

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saved. well the same thing works for stocks. sorta ,put all your eggs and

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shares of the newly IPO to whatever dot-com and it could be a moonshot. [chart on screen]

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SpaceX IPOs at fifty bucks a share and soars to a thousand dollars a share, but

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well then the Martians kill the visitors and eat their brains and the spacecraft.

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oh well you were rich for at least an hour. that's something right most people [alien on flaming planet]

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don't want to live such a volatile life, especially when it comes to thinking

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about long-term investing and maybe even retirement. when your entire investment

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professional investor it's likely that you'll get weak and sell at just the [woman types at computer]

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wrong time .so instead of having to worry about timing and picking just the right

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stock most investors buy a basket of stocks which are diverse. like two-thirds

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US stocks one-third non-us stocks. maybe twenty percent of your portfolio is

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don't forget that. so yeah when you diversify and two or three of your

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stocks take a dive, well then not all of your eggs are ruined. there are just one

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