Research ProposalPDF Available

Behavioural patterns and fears in investor psychology



It is well-known that the receipt of information by any person undergoes transformations, modifications and distortions depending on the personality, the experience, the level of education and culture and the habits of each person. In the activity of promoting and selling a computer service for investors, one can notice that there are several behavioural patterns. Thus, while for some clients the presentation of a capital evolution chart is a decisive factor, other investors can make a decision only after analysing the figures in the investment plan, and some others only after hearing a verbal presentation of the respective service. After a significant number of observations in this area, we were able to develop a collection of investors' behavioural patterns. The present paper presents all these psychological types of behaviour, in the investment context, accompanied by observations on the particularities of each pattern, the identification method, the appropriate manner of transmitting information and, perhaps most importantly, the elements that can positively influence the investor's decision, depending on the typology they belong to. As we are talking about an investment activity, which of course involves taking a risk, the fears that the investor is facing represent a special topic. Poorly addressed in the research literature, investor's fears are the topic of the second part of this paper. We will present you the different types of fear that investors face, the ways in which these can be identified and especially the actions by which these fears can be eliminated or controlled, so that they do not produce negative emotions during the investment. The present paper covers two important topics that are hardly addressed in the research literature. The article addresses equally to both those who work in the field of marketing and promotion of services for investors, as well as to the investors themselves, who can identify themselves as party of different typologies and thus explain their reactions and especially the fears they face. They can also identify the different ways by means of which the investment process can become stress-free.
Behavioural patterns and fears in investor psychology.
Cristian Păuna
Pre-abstract. This paper is the result of a long activity in the field of sales and of a
detailed analysis longer than ten years of the profile of investors who are faced with the
situation of purchasing a computer service meant to automate their investments. The paper is
written during a doctoral research activity in the field of economic informatics. As engineer,
economist and computer scientist, I do not have an official status of psychologist. For this
reason, the paper has been rejected from publication by several psychology journals. As I
was aware of the usefulness of the article and without having any explicit will of affirming
myself, I chose to publish it in the online environment, in order to be accessed by those who
will find it useful. I dedicate this work to all my marketing and sales collaborators, both past
and present or future, with the hope that they will find here an answer for parts of their
success or failure.
Abstract. It is well-known that the receipt of information by any person undergoes
transformations, modifications and distortions depending on the personality, the experience,
the level of education and culture and the habits of each person. In the activity of promoting
and selling a computer service for investors, one can notice that there are several
behavioural patterns. Thus, while for some clients the presentation of a capital evolution
chart is a decisive factor, other investors can make a decision only after analysing the figures
in the investment plan, and some others only after hearing a verbal presentation of the
respective service. After a significant number of observations in this area, we were able to
develop a collection of investors’ behavioural patterns. The present paper presents all these
psychological types of behaviour, in the investment context, accompanied by observations on
the particularities of each pattern, the identification method, the appropriate manner of
transmitting information and, perhaps most importantly, the elements that can positively
influence the investor's decision, depending on the typology they belong to. As we are talking
about an investment activity, which of course involves taking a risk, the fears that the investor
is facing represent a special topic. Poorly addressed in the research literature, investor’s
fears are the topic of the second part of this paper. We will present you the different types of
fear that investors face, the ways in which these can be identified and especially the actions
by which these fears can be eliminated or controlled, so that they do not produce negative
emotions during the investment. The present paper covers two important topics that are
hardly addressed in the research literature. The article addresses equally to both those who
work in the field of marketing and promotion of services for investors, as well as to the
investors themselves, who can identify themselves as party of different typologies and thus
explain their reactions and especially the fears they face. They can also identify the different
ways by means of which the investment process can become stress-free.
1. Introduction.
Probably one of the most difficult activities in the first decades of the third
millennium is the promotion and sale of services destined for investors. Although financial
investments are an increasingly important activity in the overall turnover of business, the
existence of risk and the possibility of choosing unprofitable investments may lead to
difficulties when it comes to choosing the investment or separating the legal activities from
the illegal or unprofitable ones.
For this reason, the sale of profitable and real investment services is a real challenge
nowadays. In order to raise awareness of the psychological processes that take place during
the activity of promoting and contracting services for investors, the present paper identifies
different patterns of psychological behaviour, the main characteristics of the individuals that
are part of each typology, the modalities of receipt of information and elaboration of the
decision and the way in which a favourable decision can be positively influenced by the one
providing the information.
At the same time, as this is an investment process, that is, an activity that involves
taking a risk, the investor's fears play an important role in analysing the offer, in accepting
the contract conditions and especially during the performance of the contract. The fears are in
direct correspondence with the negative emotions of the investor, which may lead to
decisions of reducing or stopping the investment at unprofitable times, often prematurely,
before being able to evaluate the long-term profitability. In addition, negative emotions create
stress, which is an unprofitable factor in this area. The stress elimination becomes a long-
term profitability factor.
The identification, explanation and elaboration of informational measures that can
manage the effects of fears and the emotions of the investor are essential issues in the
investment process, a process that by definition is carried out throughout a long time.
Identifying fears and informing the investor correctly can lead to a stress-free activity.
Basically, this is one of the explicit purposes of the present paper. By promoting an honest
investment service, we want to identify the measures by which we can develop a stress-free
activity, although the risks assumed are substantial, risks meant to achieve the purpose of the
activity, which is singular, namely profit.
Some of the conclusions presented in this article can be explained and confirmed by
addressing the language and behaviour profile (Language and Behaviour Profile) developed
by Rodger Bailey ever since the 1970s. The special contribution made by this paper is the
adaptation of the principles to the investment activity. The identification and elaboration of
the control measures of the investor's fears represents the coverage of a gap in the research
literature. The names given to each behavioural pattern are original and have the purpose to
easily identify the repetitive type, in an investment context. Also, the names given to the fears
have the purpose to easily identify these, in direct correspondence with the investment
2. Behavioural patterns.
During several years of observations, the presentation of the same investment offer to
several types of investors has generated different reactions and, at the same time, different
needs for the transmission of information, both in terms of the mode of transmission and of
the content requested by them. After successive modifications of the presentations, certain
types of investors could be identified, with several subjects having the same type of requests,
although they were part of different social groups. Hence the idea that the investment offer
must depend on the psychology of the individual and not on the technical characteristics of
the service offered, which, of course, is the same for all clients.
Below we present the behavioural patterns of investors identified in this research, the
ways in which these can be recognized, the way in which the typology determines the
investment decision and methods by which the information provider can positively influence
an investment decision making. The conclusions to be presented are personal conclusions,
confirmed during an activity of more than ten years of study. After the elaboration of this
typology list, all the subjects were included in one of them, without the need of further
2.1. The active and passive investor.
In terms of the action, we found that there are two distinct patterns. The former is that
of the active investor, with initiative, who analyses the offer and makes a decision. The latter
type is that of the passive investor, the one who waits for others to take the lead or waits until
others make a favourable decision.
The active investor.
The typology of the active investor corresponds to the determined people, who
already have the purpose of making an investment and who are looking for the right offer,
often having already elaborated a list of performance criteria. Initially, we had called this
pattern the bold investor. The people included in this typology do not need the opinion of
others, they can analyse and understand the investment offer themselves and are proactive,
decisional people, looking for opportunities. Past experiences can be decisive factors, as these
people are the most suitable to make the difference between several investment plans.
The active investor can be recognized based on the structure of the phrases. He/she
has a clear speech, with short sentences to the point. He/she talks about concrete actions,
about his/her goals and sometimes about the conditions that would cause him/her to make a
decision. He/she is the kind of direct person, who says what he/she wants and who, once
he/she gets the desired offer, makes a decision, most often on the spot. The active investor is
often impatient and asks for concrete information that he/she wants to receive immediately.
He does not like delays or evasions as these may cause him/her to become suspicious. A clear
offer coming on the spot can determine him/her to make a decision.
The favourable decision of the active investor can be positively influenced by a
direct, frank approach, by a clear and prompt offer. His/her initiative can be stimulated by the
existence of a momentary opportunity, of a discount or of a favourable situation at the
moment. The pattern of the active investor can be positively influenced by the actions of
having complete control of the activity, of being able at any time to make decisions regarding
the investment itself and by the possibility of obtaining an additional advantage for the
simple fact that he/she can decide quickly.
The passive investor.
In total opposition to the active investor, the pattern of the passive investor
corresponds to that of the people who need to wait and evaluate the offer received several
times in several moments of time. They need other people to take the initiative or to
recommend the offer received. Passive investors will analyse the investment plan for a long
time and involve a number of other people in the analysis and decision-making process. They
need others to tell them that the offer is worth the attention. There have been cases where the
analysis process lasted more than a year, during which time, of course, the profit was
obtained only in the accounts of others.
The passive investor can be recognized on the basis of his/her long or incomplete
sentences, from which the subject or verb is often missing, because most often the
conjugation should be made using the third person. The passive person uses passive verbs,
which do not denote a clear action, or verbs turned into nouns. They will not say "I will
analyse the offer" but will say "after the analysis will be performed", avoiding to specify who
will perform the analysis. The long, twisted and incomplete sentences of the passive investor
often refer to scenarios not related to the offer and which often explain that he/she would like
to accept the offer but that for the moment “no decision has been made”.
Without being accused of bad intention, the passive investor simply postpones the
decision until someone else suggests to him/her what to do. What is often missing in this case
is the correct and complete information process of those other people who will participate in
the decision making. Moreover, if they have a particular interest for the investor not to decide
favourably on the offer, they will proceed accordingly. Many times, third parties involved in
making investment decisions for others come to ask for a commission to "support the
situation". For deontological reasons, our answer is invariably: no.
The decision of the passive investor can be positively influenced by the seller through
phrases that invite one to analyse the offer in detail. The active participation of the seller in
the process of informing third parties can lead to success. In addition, the investor may
become aware of certain particular aspects of the offer about which he/she may think for a
longer time and which he/she can compare to other offers. It has been proven that these
criteria suggested by the seller become the evaluation criteria of the investor, which are
explicitly requested from his/her third parties who analyse the different offers.
Another decision factor that works positively in the case of the passive investor is that
of the occurrence of a favourable event, independent of the seller, which can strengthen the
decision making. For example, after a major stock market crash, when investment risks are
minimal, a passive investor may consider that the situation is good enough to make a
decision. In these cases, the prompt information coming from the seller can determine the
Although in this subchapter investors are divided into two clear patterns, active and
passive, it must be understood that there are people who oscillate or have characteristics
specific to each of the two typologies. In this paper, I have chosen to present the extreme
patterns but without excluding the possibility of interference. However, I noticed that there is
always a preponderant typology and that the decision is best influenced by the dominant
characteristic of the individual's personality.
2.2. Motivated investors.
When I started selling services to investors, I thought their only motivation was
profit. Over the years, I was greatly surprised to find that before making a profit, other factors
are more important for some people, and which in time become factors that influence the
decision. From this point of view, we identified four distinct typologies of investors, as
follows. The patterns below refer to the identification of a specific objective for each pattern.
Of course, there are people who can have common characteristics from several typologies,
but each time it has been found that the decision-making factor depends mainly on one of
them. Typology names use several negative adjectives to highlight the pattern feature.
These adjectives do not, of course, characterize investors as individuals, but only their
investment plans, reactions and specific information needs.
The profiteer investor.
This typology corresponds to the people who are willing to take the risk of the
investment and to obtain a maximum profit, taking advantage of every opportunity where
they can speculate market conditions. These are the people who take advantage of every
opportunity to make a profit. Usually, they are experienced investors, accustomed to taking
risks and who have clear profitability criteria that they want to achieve. Investors of this
typology are people who are used to make several simultaneous investments and will always
compare their performance.
The profiteer investor can be identified by means of the fact that he/she asks clearly
about the cost of risk and the annual return on the investment. Often, for this type of investor,
the details don't matter. Usually they are part of the profile of active investors. The
favourable decision can be positively influenced by the seller by means of the presentation of
the efficiency obtained in case of other investors depending on the risk assumed. In case of
the profiteer investor, one can often find the will to obtain a maximum profit with a lowest
possible risk assumed. Also, this category usually includes people who want to make a profit
but for the risk to be taken over by someone else, something that is not possible nowadays.
The lazy investor.
In the typology of the lazy investor, the effort that he/she has to make in order to
achieve and follow-up the investment comes first. Although the level of profit is important,
the most important thing for the lazy investor is for him/her not to have to do something.
He/she is willing to take the risk but wants the profit without making any other effort.
The pattern of the lazy investor can be detected from the discussions during which
he/she does not want to know details of the investment, but he/she seeks the clauses that bind
him/her to various actions. Once he/she realizes that he/she doesn’t have to do much, he/she
asks about the level of profit and about the risk assumed. The lazy investor is usually part of
the passive typology, has the experience of other investments and fears the obligation to
follow the efficiency or to perform actions that determine the efficiency of the investment.
Most often, the lazy investor owns other businesses that keep him/her busy and looks for
opportunities to diversify his/her investments without effort.
The investment decision in case of the lazy investor can be positively influenced by
the emphasis of the advantages that would confirm him/her that the investment does not
consume time or other resources. Very often, in case of lazy investors, the reading of the
contractual obligations convinces him/her if the investment does not imply for the investor to
do something in particular for the contractual duration. He/she just wants to be informed
about profitability and will appreciate the simplicity of the offer.
The apprehensive investor.
The apprehensive investor is the person who constantly wants to have a controllable
investment, in which the risk is precisely dimensioned and limited. The general fear of this
typology is that of losing more than he/she is willing to do. The apprehensive investor will
first be interested in risk measurement and management measures before finding out what the
expected profit level is. This typology can be recognized based on the long discussions about
risk, about the technical possibilities of risk limitation and about the ways in which he/she
can control the risk.
The apprehensive investor's decision can be positively influenced by a clear offer in
which all those aspects that determine the limitation and risk management are presented. The
clear technical solutions for capital and risk management will come first in its analysis,
before considering the profitability or efficiency of the investment. The apprehensive investor
will usually want to be convinced that all those technical means are working. Often, the
apprehensive investor would start detailed technical discussions or would want to talk to
other investors who have already benefited from those systems.
The fearful investor.
This typology is identified by the existence of the main fear in the field of financial
investments, namely the fear of losing money. The fearful investor wants to make a profit,
he/she wants to take a risk but he/she is afraid of losing the money invested. The fear usually
comes from other known cases of unprofitable or dishonest investments that have existed
over time. The fearful investor needs to convince him/herself that nobody and nothing can
steal his/her money.
The typology of the fearful investor can be easily detected in the discussions in
which he/she states that the offer received is too good to be true. It is a kind of generalized
mistrustful person who considers that, before a serious confirmation, the offer received is
meant to deceive him/her. From the point of view of the seller, the typology of the fearful
investor is the most difficult to manage, all the more so since the investor may have had
negative experiences in the past.
The decision of the fearful investor can be positively influenced by presenting
him/her a transparent offer, in which the capital is deposited in his/her personal accounts,
where only he has access and from which nobody and nothing can withdraw capital or
profit. The fearful investor is the person who needs the most confirmations before making a
favourable decision. Most of the time, the insistence and the length of time needed for the
fearful investor to make a decision may lead to failure, simply because the seller loses
his/her patience after having offered him/her all the information several times in a row.
2.3. Incident and avoidant investors.
In terms of the justifiable action, it has been found that the decision of an investment
may depend on two major typologies. There are people whose main purpose is to reach a
goal. For example, that of making profit. This is the typology of the incident investor, who
is willing to perform an action to obtain profit. The second pattern is that of the avoidant
investor, the person for whom the justification of an action comes from the will to move
away from a certain problem or to prevent something in particular. For them, a convenient
offer will outweigh another that could involve for example an uncontrolled loss.
The incident investor.
This typology corresponds to people who understand to take action in order to
achieve certain objectives. They are usually active people, accustomed to the investment
conditions that measure efficiency and make decisions because they want to achieve a
certain objective, in this case the profit.
The incident investor can be recognized from the discussions during which he/she
asks what has to be done in order to achieve a certain purpose. The incident investor usually
has one or more goals already formulated, which he/she states and discusses. Most of the
times the incident investor states the situations by which he/she would get a certain
satisfaction, coming for example from a certain level of investment efficiency.
The decision of the incident investor can be positively influenced by the presentation
of a clear offer, with clearly formulated objectives, objectives that can be achieved under
conditions that are also presented in detail. The incident investor is usually an experienced
one, who knows the risks taken. Discussions with the incident investors should be directed
towards achieving the goals, towards obtaining the favourable conditions that determine the
efficiency increase. Usually the inclusion of the incident investor in the investment
decision-making chain can positively influence his/her decision. Once the efficiency criteria
are met, the incident investor will re-analyse the investment, usually being the one who has
the initiative to grow the business in order to achieve new objectives.
The avoidant investor.
This typology is characteristic of people who consider that a decision is good
enough if it avoids a certain problem or because it prevents the emergence of an unwanted
situation. This typology is primarily determined by the situation of preventing certain
situations before deciding to perform an action. In fact, most of the avoidant investors are
part of the passive typology and will make a decision only after considering that it is
justified in avoiding an unwanted situation.
The avoidant investor can be recognized from the discussions during which he/she
asks how certain situations can be avoided or resolved. His/her phrases are usually
complicated, and not often the situations he/she wants to avoid are purely hypothetical
situations, without relevance for the investment considered. The avoidant investor is the
person who requests the inclusion in the contract of certain conditions meant to avoid
certain situations, situations that are often not related to the actions to be taken.
The decision of the avoidant investor can be positively influenced by including all
the measures he/she needs to make sure that the situations he/she wants to avoid are
excluded from the activity.
The seller will have to assure the avoidant investor that together they will eliminate,
avoid, prevent and exclude all the cases that he/she wants to solve verbally and in writing. In
this context, an investment decision will be justified. The study carried out during more than
ten years of activity in the field of sale of services to investors shows that more than half of
investors have an avoidant nature.
2.4. Internally or externally motivated investors.
It is found that there are people who find the motivation of an investment decision
internally. They are their own thinkers, analyse the information received and decide on their
own. Equally, the second category of investors is that whose motivation comes from outside,
following a feedback coming from people they trust.
The internally motivated investor.
This typology includes those who ask for information in order to analyse and make a
decision. They are their own analysts, masters of decisions, ready at any time to assume the
consequences of decisions. For them, the motivation of an investment is triggered by their
own analysis of the information received. They will make a favourable decision if everything
fits their own rules, principles and ideas.
The internally motivated investors can be recognized in discussions where they show
what they know, how they think and what they want to identify in the offer. They evaluate
the performance based on their own criteria and are usually against when someone else
suggests them what to do. All the indications from outside regarding the taking of the
investment decision are treated as pure information. The personal decision based on one's
own analysis and thinking will be a defining factor.
The decision of the internally motivated investor can be positively influenced by offers
in which he/she is invited to decide alone, by means of options in which he/she is invited to
take into account different positive aspects and by including him/her in the elaboration of the
final investment plan. His/her belongingness in the decision-making chain can often be a
sufficient reason for a favourable decision.
The externally motivated investor.
The second category is that of investors who find motivation outside of them. This fact
is not due to their impossibility or inability to judge the offer received, but only to the fact
that they have an intense psychological need to obtain confirmation of the truthfulness of
their conclusions from other people they trust. The motivation of the decision is triggered by
the feedback received from outside. Usually the externally motivated investor does not have a
clear set of rules or standards, most often adopting the analysis criteria of the third parties
invited in the decision.
The externally motivated investor can easily be identified in a discussion during which
he/she states that other persons will be informed and invited to say their opinion on the offer
received. Most of the time those other people are either part of the family, lawyers,
economists or simply friends whom the investor trusts, although often the people invited to
express their opinion are completely uninitiated in the investment field. The externally
motivated investor will always make comparisons between the offer received and universally
known profitability quotas or standards. For him/her, the information received from third
parties will be treated with a higher dose of certainty than the offer received. In a poorly
oriented context, the externally motivated investor will draw the conclusion of an
inappropriate offer caused by the fact that he/she just invited in the analysis inappropriate
The decision of the externally motivated investor can be positively influenced by the
seller by the presentation of the different criteria that the others must identify, by analyses
and discussions based on the feedback received from the external persons. A constructive
method is that of suggesting that the investor receive feedback from more appropriate
persons, more connected to the field discussed, even if they are not initially part of the
investor's circle of acquaintances.
2.5. Organized and disorganized investors.
The human typology generally has two broad categories, when we consider the
criterion of respecting rules. From this point of view, the investors are also divided into two
main personality types.
The organized investor is the person who enjoys the existence of clear rules through which
the investment is made. On the other hand, the disorganized investor is the one who does not
want to obey a predetermined set of rules, the one who will try every time to change
something, often starting from the idea that things can be done in a better way.
The organized investor.
This pattern includes the investors eager to follow a set of rules already established.
They accept the conditions of the offer and the contractual conditions, once they have
established that all these conditions have a justification and fall within the personal limits of
The organized investor can easily be identified in discussions where the rules of the
game are presented. He/she is the one who informs on the lists and criteria of operation, on
the opportunities, options and choices existing in the offer, which have already been tested
and can be easily included in the activity.
The motivation and decision of the organized investor comes from the comparative
analysis of several existing options. His/her decision can be positively influenced by the
seller by means of the presentation of a comparative analysis of the options in the offer.
When it comes to choosing between multiple offers, all you have to do is show him/her the
undeniable benefits of your offer.
The disorganized investor.
The disorganized investor is the person who obeys a set of rules with difficulty. He/she
is the one who, once aware of the existence of strict rules, will try to make all kinds of
proposals outside those rules, believing that in this way he/she will obtain profit sooner or
that he/she will achieve greater investment efficiency.
The disorganized investor is recognized in the presentation discussions by means of
the fact that he/she always asks "why" when a new rule is presented. He/she is the one who
will always make proposals, even if the proposals could often put him/her in the situation of
accepting an exaggerated risk. For this type of personality, it is important that no one else
imposes rules on him/her.
The decision of the disorganized investor can be positively influenced by means of the
presentation of an already established procedure that has given the best results, the procedure
being chosen from several possible variants. Often, after accepting an offer and making an
investment, the disorganized investor wants to change the rules of collaboration. These
situations can significantly decrease the efficiency of an investment. These can be avoided by
signing clear contracts, in which all the functional details are clearly stipulated. The practice
shows that the typology of the disorganized investor also includes bad payers who, although
they have reached their investment purpose, delay the payment of invoices on time, for the
simple reason that they do not want to comply with the rule regarding the payment term.
From experience, the most unprofitable investments are made by the disorganized investors.
2.6. The detail and overview investor.
Experience shows that attention to detail is important in identifying more investment
patterns. Thus, we can talk about the investor who pays attention to detail, the one who will
analyse the daily activity and will pay attention to all aspects of the activity itself. At the
same time, as they are more experienced investors with an overview will appreciate the
activity through a long-term analysis, without being attracted by the details that are so costly
to analyse.
The detail investor.
The detail investor is the one who follows the activity in the smallest detail, although
he/she has an overview. They measure the profit obtained daily and are very pleased when
the balance of accounts increases, even if by only a cent. However, when they encounter a
day or a period when a loss is recorded, by using the extrapolation and generalization of the
phenomenon, they panic. The panic is bigger if they have never participated in a stage where
losses or negative positions are recovered and closed on profit.
The detail investor can be recognized from the beginning of the investment in
discussions in which he/she pays a lot of attention to all the elements of the business plan.
Although he/she has been informed that the profitability of an investment is estimated at
intervals of months or years, he/she pays attention to what happens daily with his/her money.
His/her speech includes many adverbs and adjectives and delves into details that often have
nothing to do with the activity itself.
If he/she loses the logical sequence of the discussion, he/she will resume the logic of facts
from the beginning, rarely being willing to continue from where he/she started.
The solution in case of the detail investor who can positively influence his/her decision
and especially the one which can cause the fear not to turn into negative and destructive
emotions for the investment itself is that of presenting him/her an overall plan with as many
details as possible. Their decision can be positively influenced by the seller by using a precise
language, rich in details that matter to the investor, a plan meant to explain in detail what is
still incomprehensible for the investor.
The overview investor.
This category is usually made up of experienced investors, who are waiting for long-
term results, for whom previous events have already shown that day-to-day detail analysis is
not a good indicator for the annual investment efficiency. The overview investor is
recognized in discussions by means of the fact that he/she can present the activity in a
random order of facts, without focusing on the details, following the overall long-term results
of the investment. They often bring up general concepts and ideas related to the investment
process, ignoring the insignificant details. The discourse of the overview investor is simple,
without too many adjectives and adverbs, being concentrated on verbs that describe the
activity as such.
The danger in case of the overview investor is that of setting unrealistic expectations.
Without paying much attention to details, they can often expect a certain efficiency and be
disappointed if they do not obtain it. Therefore, the most important aspect when submitting
an offer to an overview investor is to set realistic expectations, in direct connection with the
results which will come.
The decision of the overview investor can be positively influenced by means of the
presentation of a long-term investment plan. The main and essential ideas of the offer must
be explicitly presented, the long-term estimated yield being a significant criterion for
evaluating the offer. As a general rule, overview investors are active persons who hold
control over their own decisions and who will agree to that offer, once they identify a
coherent long-term plan.
A particular aspect of the overview investor, especially in case of investments with
time-varying efficiency, is that once an increasing efficiency is obtained, he/she sets his/her
expectations so that the efficiency will increase in the next year of activity too. Without
paying attention to details, the overview investor can hardly understand that the variation in
efficiency may depend on detail factors, stock market developments, different particular
events that occur only in certain periods, etc. They would always ask for explanations in
relation to the cases showing decreased investment efficiency.
2.7. Logical and emotional investors.
From an emotional point of view, two major types of behaviour can be distinguished.
The first pattern is that of the sentimental investor, who has positive and negative emotions
related to the development of the investment. The second pattern is that of the logical,
thinking investor, who analyses the evolution by means of the figures and the market
conditions and who is neither overwhelmed by the negative emotions nor enthusiastic about
the positive ones. Of course, people in the middle or who have different proportions of these
two patterns can often appear. The presentation of the extreme patterns will allow the
analyses of each characteristic separately, those in the middle having usually one of the
features as dominant.
The emotional investor.
The pattern of the emotional investor refers to the person who has emotions in relation
to the development of an investment and lets him/herself driven by these emotions. Positive
emotions are generated by the significant profit increases, which are also the reason of the
enthusiasm that some investors display and share with the people they know. Investor’s
enthusiasm is probably the best advertisement the investor can make to the investment itself.
However, negative emotions, those caused by the loss of profitability or, in cases of
crisis, by possible losses or opened negative positions to be recovered, can cause the
emotional investor discomfort, worry or even panic. I often receive messages with the subject
"panic" or "concern" from emotional investors, especially in case of those lacking the
experience of such a loss episode in the past. While positive emotions are somehow shared
by emotional investors to a certain extent, negative emotions are transmitted much more
strongly. Very often the emotional investors seek to calm themselves down by estimating
other criteria, by looking for hopes in various news or public opinions, forgetting of course
the strict rules of the carrying out of the investment they take part in.
The emotional investor can be recognized at the stage of presentation of the offer by
the fact that he/she often asks "what do you do if a certain situation arises?". They are very
eager to know beforehand about the cases in which losses can occur and how these are kept
under control and recovered. During the investment, emotional investors are easy to
recognize, especially during crises. As far as I'm concerned, the record is held by an investor
who, during a one-month financial crisis, wrote to me and sent more than 1200 messages
expressing his/her concern, although after the first five days the balance of his/her investment
account had already begun to grow. I have often found that positive emotions last at most 3-5
days after they are installed, while negative ones linger in the mind of emotional investors for
weeks, although the causes that generated those emotions have long been extinguished.
The decision and especially the experiences of emotional investors can be positively
influenced by the clear explanation of the investment plan. They need to understand that
losses are an integral part of an investment activity and that, as long as there is a functional
loss recovery plan, they should wait calmly and estimate the efficiency of the activity after
the crisis periods passed. It has been found that in a proportion of almost 100%, emotional
investors transmit negative emotions. Although the support contract does not include
psychological services, they often expect someone to shatter their worries. One of the main
measures in support of solving such situations is to instruct these investors not to invest
amounts of money that they cannot afford to lose. I mention this criterion not because those
losses are very possible, but because in this way, negative emotions will not cause stress. A
specific language will also be able to mitigate the emotional impact of the losses. Adjectives
such as interesting, extraordinary, intense, unique will emphasize the emotional realignment
of ideas, all the more so as these are accompanied by results that show an improvement of
The logical investor.
The second extreme category from an emotional point of view is that of the logical
investors who do not allow themselves to have any emotions in relation to the development
of the investment. Usually, these are mature, experienced investors, who have thoroughly
analysed the investment plan and who are fully convinced of its functionality. The logical
investor is the one who has been through crisis situations several times, the one who knows
that the recovery of any losses is only a matter of time. In addition, the risk of the amounts
that the investor allows him/herself to lose ensures him/her an emotional separation.
The logical investor can be easily recognized during crises. He/she simply looks at the
phenomenon without allowing him/herself to feel emotions which would affect his/her
thinking. Experience clearly shows that the best results are obtained by logical investors.
Most often, crises involve the transfer of ownership at low prices from panicked people, to
those who keep their temper. The logical investor is well aware of the investment system in
which he/she is involved and is convinced of its functionality.
The decision of the logical investor can be positively influenced by means of the
presentation of the concrete facts, of the results obtained in similar cases, of the statistics and
of all the aspects and particularities that lead to profit. The logical investor is the person most
eager to look into the accounts of others the results obtained during the previous crises. At the
same time, once he/she has joined a new investment plan, the logical investor will wait for
the first crisis to be convinced of the veracity of the new investment method.
2.8. Independent and cooperating investors.
Another differentiating aspect is related to the professional independence of the
investor. Thus, one can identify independent investors who invest their own funds and
investors who are in various ways of interdependence with other persons or institutions,
whom we will contextually call cooperating investors.
The independent investor.
The pattern of the independent investor refers to the person who invests his/her own
capital, is the master of his/her own decision and is willing to answer for the risk assumed.
Not to make a confusion: an investor who comes alone to the negotiations but makes the
investment decision at home in a family council where the wife has the last word is not an
independent investor. The example is eloquent, since the identification of the independent
investor is not always so obvious. Usually a clear discussion about the profile, intentions and
goals of the investment can elucidate the investor's belongingness to the pattern of the
independent or cooperative one.
The manner of presenting the information and the attention towards the decision
makers differ substantially between the two typologies.
Independent investors are usually part of the active typology, internally motivated
and, if they have significant experience in the field, they are overview investors. The action
of the seller in case of approaching an independent investor is to present the entire offer
clearly, whenever it is needed and to follow the development of the discussions in the
direction requested by the latter. As a rule, once they have accepted the continuation of the
discussions about the investment offer, the independent investors have a real interest, which
greatly increases the chances of finalizing the marketing activity and signing the contract,
especially if the conditions offered are in line with the investor’s acceptability levels.
The decision of the independent investor can be positively influenced by means of the
presentation of the performance, efficiency, advantages and disadvantages of the investment
and by the clear invitation for him/her to compare the various offers and to make the decision
most appropriate for his/her own pocket on his/her own. In terms of the use of an artificial
intelligence system able to manage investments, in case of the independent investor,
switching the responsibility to a software system is an easier matter than in the case of the
cooperating investor, as we will see below.
Once the independent investor is convinced of the increased utility, efficiency and
performance of the automatic system as compared to the way in which he/she made the
investments until then, he/she will readily accept the change. Of course, he/she will follow
the performance achieved for a while and compare it with other known investments, the
duration of this process depending on the limits and the acceptances of each one. However,
after the results obtained are up to or exceeded expectations, the independent investor will
consider the activity as normal, will introduce it in his/her own investment policy. He/she
will seek to increase the amounts invested once the profit obtained exceeds the efficiency of
older investments and will appreciate that the use of software eliminates his/her effort and
The cooperating investor.
This typology includes all those investors who are not alone in the investment
framework. The capital invested is not theirs, but belongs to a group of persons (natural or
legal) which they belong to. The preceding example is that of a family, in which the decision
is made jointly by the members of that family. But the example is not unitary, there may be
cases where someone wants to make an investment with the capital of a company which has
several associates or with the capital of a group of friends who have jointly put together
money to make a larger investment or, in the most complicated case, in which the investment
is made by a company that wants to invest the clients' funds, in which case the investment
decision is taken by a board of directors which includes both the board of directors of the
company and representatives of the associates or of the clients that the fund represents.
It must be understood that the more complicated is the scheme of the group which
includes the investor, the person to whom the offer was addressed and who comes to the
negotiation table, the more the chances of success in reaching a functional contract decrease.
In this case, the offer and the details are presented to a person but the decision is made by
two, three or more persons who do not come in direct contact with the seller and who receive
only the information that the cooperating investor is willing or able to transmit. This
information will undergo processes of elimination, distortion or generalization depending on
the culture, the level of understanding, the level of professional training and the will of the
cooperating investor. Quite commonly, essential aspects of the offer simply do not reach the
decision-making factors, for the simple fact that the cooperating investor did not understand
the importance of those factors.
Countless times it has been found that the cooperating investor is more willing to find
out information about the number of clients who have already purchased the investment
service than to understand the efficiency of the investment. This difference has even become
a signal for the identification of a cooperating investor who often hides him/herself
intentionally under the guise of an independent investor. He/she knows that a large number of
clients is an indicator that can convince a large number of decision makers in his/her group,
while the strict presentation of the efficiency of the investment would be an insufficient
detail. For the cooperating investors the herd instinct is primordial, once they themselves are
part of a herd. The decision in case of a cooperating investor, even if it is not a decision made
by him/her but by the group of which he/she is a part, can be positively influenced by the
seller who can find ways to present the offer in the decision group. Once the seller has
understood that he/she is dealing with a cooperating investor, attention should be directed
towards finding opportunities by which the offer can be presented directly to the deciding
persons, no matter how large their number is.
This action substantially increases the chances of contract success. If this is not
possible, the seller must ensure that the cooperating investor has kept in mind the important
aspects of the offer, the marketing advantages and, if possible, the order in which these
should be presented. Quite frequently in marketing meetings I write by hand a list of ideas
that I give to the investor. It is the best way to transmit personalized information, written
especially for him/her, understood by means of a discussion and easy to be further
A lot of complications may arise during the negotiations in case of cooperating
investors. There are cases in which the cooperating investor is in fact the representative of
another person who, because he/she considers him/herself to be superior to all, does not have
the availability to receive the correct information. It is very difficult to transmit new
information and for this to be considered as true or functional to the type of person who
knows better just because he/she has been making investments for decades. Moreover, if the
decision-making forum to which the cooperating investor belongs includes persons with poor
professional training or with training in totally different fields, the use of artificial
intelligence in capital investments may seem like a science-fiction subject, without the
possibility of an interest to be developed because the decision-makers do not understand how
the system works.
At the same time, there are positive surprises as well in the case of negotiations with
cooperating investors. I saw a case when the husband, convinced of the efficiency of the
system and of the opportunity of the offer, after seeing that the wife did not want to employ
an artificial intelligence system in his investments, suddenly moved to the independent
investor's side and made the investment without telling the wife anything. In such cases the
confidentiality of the contracts becomes a motivating factor that can positively influence the
2.9. The investor who sees, hears, reads or does something.
Practice shows that the way in which each investor takes their decision is very
different. Although the information collection channels are multiple, each investor will have
a favourite one. For some, the decision is positively influenced only by the existence of a
certain information channel, although all the others can equally provide the same
information. There are investors for whom viewing a profitability chart can be a defining
factor. For others, hearing an oral presentation causes them to make a decision. Another
typology seeks to take their decision on the basis of written offers, and others, more and more
from the investment field, need to be involved in the process and do something before
deciding. The important aspects for each of these four behavioural patterns will be detailed
The investor who sees.
People included in this behavioural pattern need to receive the information in visual
format. For them, what they see with their own eyes has an absolute value of truth. Thus, they
will ask to see a profitability chart, the results obtained in the accounts of other clients, to see
that the company from which the offer comes exists and has the office exactly at the address
written on the offer. The investor who sees is usually a person who pays attention to details,
with visual memory, a good observer of differences or inadvertencies. For investors of this
type, no information is complete until they obtain a visual confirmation of the respective
offer. The investor from this category can be easily recognized in discussions when he/she
explicitly asks to see something. As a rule, to view something that belongs to the tenderer
his/her acceptance is needed, which can usually be granted following an explicit request. I
was deeply surprised to find that the simple acceptance of the seller to allow the investor
access to view different information is a strong motivational factor with great capacities to
positively influence the investor's decision. He/she simply feels that the seller has nothing to
hide and that the former allows him/her without restriction to view the information requested.
Of course, there are limits imposed by the confidentiality of the contracts, but the useful
information can be presented in compliance with all these restrictions, without diminishing
the quality of the information received.
The ways to positively influence the investor’s decision refer to the direct, visual
presentation of the various key aspects of the offer and of the results obtained in that activity.
Once the visualization request has been formulated, the seller must invite the investor to
"show" something to him/her, so that he can "see with his/her own eyes" the images, the
graphs, the results, the evolutions, the profit, etc. The most important aspect is for the
information presented to the investor to be the authentic one, without undergoing a certain
transformation. The veracity of the information displayed is a determining factor in the
decision. This is why it is important to present not only the offer in an attractive format, but
also the current information meant to be shown at any time to those who request it.
Usually, the investor who sees has, in addition to a pronounced visual memory, a
developed imagination. A motivating factor that can be included in discussions successfully
is that of the invitation to imagine the evolution of activity in his/her account, or larger
amounts of capital, or take into account different hypotheses already present in the
discussion. The investor who sees will be very attracted by the possibility of an imaginative
extrapolation of the different scenarios in relation to his/her own investment. Another
positive motivational factor can be obtained by printing the information visualized by the
investor on the spot, so that the graph, image, table, result, etc. can be subsequently re-
analysed by the investor in the later stages of the decision-making process.
The investor who hears.
A particular typology is made up of people who need to hear a presentation before
making a decision. Although they received all the information they needed, they need a direct
meeting where someone could present the offer. Most of the time, this type of investor wants
to hear the presentation from the mouth of those who are directly involved in the investment
process. In many cases, I found that a motivating factor is not the hearing of these people, but
the direct meeting with these people.
The investor who hears is recognized in the discussions in which he/she usually
requests direct meetings. The verbal presentations already elaborated do not represent a
motivational or decision factor, as these are seen as materials prepared for marketing. In the
"business to business" (B2B) field, the auditory presentation must be done ad hoc, with the
existing means, without an obvious preparation.
An important part of the typology of the investor who hears includes conscious and
psychologically prepared people, with life experience, who simply want to look into the eyes
of those involved for the confirmation of the truthfulness of the information in the offer.
Marketing meetings in this context have a special motivational load, as the way in which the
investor receives the auditory information, the tone and the way in which he/she is spoken to
is very important. From this point of view there is no pattern. Each person should be
approached in their own way and people should speak to them based on their training and
professional level. This is why marketing presentations often do not resemble one another.
I have found many times during the meetings requested by potential investors that
they focus on the way of presentation, on the tone and fluency of the discussion, the
information transmitted coming second. It is the confirmation that he/she especially wanted
to know the human factors behind the offer, to recognize their motivation and professional
quality, the details of the offer often becoming insignificant in those discussions.
Also, the typology of the investor who hears includes those persons who need to hear
information about the offer or about the company that elaborated the offer from the mouth of
third parties. For them it is not enough what they can read or view about the tenderer, a
motivating factor being the discussions with other people, known or not, whom they trust or
not, but from whom they are looking for eloquent information. A functional way by which
the seller can positively influence the decision of the investor who hears is to put him/her in
contact with already existing customers.
The investor who reads
The third pattern in this classification is that of the investors who need to read
important information. For them, the written information has absolute value of truth, all the
more so as it is written by people who are not related to the tenderer. For the investor who
reads, the offer, the professional presentation or the contract have the value of a foundation of
the activity to be contracted.
The investor who reads can be easily identified by the fact that he/she abundantly
requests information in written form. If the request is not an obvious one, the investor who
reads can be identified by means of the verification of certain information already included in
the documents sent to him/her. If he/she knows it, it means he/she read, all the more so as the
information is in detail. Typically, this typology of investors includes persons for whom the
speech has no motivational value. The investor who reads usually pays attention to details
and is strongly influenced by the value of truth and of logic of the information read. The
figures and graphs included in an information plan will have priority in comparing offers and
making a favourable decision. Most of the time, the investor who reads is the first one that
identifies the advantages of an offer and can do the analysis of the investment plan by
The investor who does something.
The fourth behavioural pattern in terms of gathering defining and motivating
information in order to substantiate an investment decision is the typology of the people who
have to do something before making a decision. You know of course the example of those
who cannot buy a car until they drive it a hundred meters in the yard of the car dealer.
Experience has shown that even in the case of the activity of implementing an investment
plan, there are investors who cannot decide until they feel through their own experience the
functionality of the system, especially since the investment involves the use of specialized
software. For them, the testing stage plays a determining factor in making the investment
decision. The action investor, as he/she is also called, although he/she has gathered and
understood all the information, needs a personal confirmation of the efficiency of the activity.
For them, creating the possibility to test the activity becomes a decisive factor.
2.10. The statistician, extrapolating, distrustful and patient investor.
After gathering all the information and completing all the important steps in the
activity of substantiating an investment, any investor must make a decision in terms of
whether or not he/she will make that investment. From the point of view of the way in which
an investor becomes convinced of the efficiency, the opportunity and the utility of the
investment, there are four distinct behavioural patterns, as follows:
The statistician investor.
The first type is that of the investor who needs a large number of examples in order
for him/her to know that what he/she sees is true. In this case, the visualization of the
efficiency of several investments, the visualization of the activity from several capital
accounts of several other investors is the decisive factor. Once his/her performance criteria
are confirmed by several examples, the truth becomes obvious to him/her.
I noticed that this pattern behaves differently from one person to another. There are
investors who need to see the same results in two different accounts, and others who need a
greater number of examples to consider that the information received is eloquent. The
decision of this type of investor can be positively influenced by showing him/her as many
investment examples as possible and insisting on their comparative analysis. The investor
will appreciate the transparency and will be ready to make a decision once he/she has
received more examples than he/she needed. However, there are cases in which the investor
named here statistician has no statistical training whatsoever. For him/her, the easy
accomplishment of a comparative analysis by the seller can be a determining factor for the
The extrapolating investor.
The second pattern is that of the investor who uses generalization and extrapolation of
information to draw conclusions. For him/her, a small amount of information is sufficient to
reach a personal conclusion. Viewing the activity and results in another case will give
him/her the opportunity to understand the investment plan more easily. But, the analysis of
the activity from a small investment account makes him/her generalize and consider that the
results are similar in a large account, which is of course an untrue hypothesis. The higher the
invested capital, the higher the profit. That is why the extrapolating investor must be assisted
in his/her analysis by the seller in order to draw the right conclusions in relation to the reality
of the proposed investment plan.
Often, these types of investors are pleasantly surprised to find that the results that
appear in their account are far superior to the ones they have foreseen. Generally, the
generalization is proportional, but in this area the profits are significantly higher as the
investment is higher. The decision of this investor pattern can be positively influenced by the
use of assumptions and generalization methods, in accordance with the reality, examples that
extrapolate the longer-term results or examples that present him/her the generalized
investment plan. A generalized methodical approach is favourable to the decision of the
extrapolating investor, as his/her action is influenced by the clarity of the investment plan and
of the offer.
The distrustful investor.
The third pattern identified in the early context of the investment decision is that of
the continuously distrustful investor. He/she needs from time to time a confirmation of the
service efficiency. For this behavioural pattern, the view of the previous experience is not
sufficient. He/she follows the activity step by step and from time to time he/she draws
conclusions. If he/she identifies a consistency in his/her conclusions, he/she becomes more
and more confident and interested in being part of the investment. However, if disturbances
arise and the conclusions they identify are not constant, this type of investor will increasingly
follow the service until he/she gets the desired confirmation.
The danger in this type of behaviour is the excessive reduction of the test interval. In
capital investments the profit must be measured in intervals of 3, 6, or 12 months. For shorter
periods, the profit values become insignificant since we are talking about an investment. I
met so-called investors who apply the periodic model for estimating results daily. In
profitable periods they draw positive conclusions but in cases of stock market crashes, for
example, they simply become scared of the losses, especially those who have never had the
experience of improvement and recovery of the negative positions that appear in such
The decision of this investor pattern can be positively influenced by the regular
presentation of the results and by the highlighting of the investment character that implies a
long-term profitability. The distrustful investor will be prepared to make a decision once the
number of time intervals in relation to which he/she estimated the activity exceeds the
minimum number based on which he/she is generally accustomed to follow the economic or
life phenomena.
The patient investor.
A particular case of the previous pattern is that of the mature, experienced investor,
who needs a long period of time to convince him/herself of the efficiency of the service or
investment. He/she will estimate the profitability after one year, two years or more and draw
the appropriate conclusions. A positive and increasing evolution will give him/her the
necessary motivation to develop a serious long-term investment plan. The decision of this
type of investor can be positively influenced by means of the clear presentation of the
evolution in time of the activity carried out in other investment accounts, by making parallels
and by highlighting the advantages and benefits brought by larger investments over a long
2.11. The trader and helpless investor.
The following behavioural patterns are anomalies from the normal investor profile.
By anomaly I mean both negative and positive aspects, as you will see. The typologies
described below are important for better understanding different behaviours of different
The trader investor.
The pattern of the trader investor includes people who identify the opportunity of the
investment plan, who have their own funds but which are insufficient and who wish to resell
the investment service to third parties, as they are themselves part of the investment. The
trader investor can be recognized from the discussions in which the details of the efficiency
of the investment come second, after careful analysis of the possibilities of collaboration.
Usually, as action people they ask directly "how can we collaborate?". Some of them have a
problem with admitting that they do not have significant amounts of capital, even though not
having a few hundred thousand dollars can't be a shame. The trader investor is the most
suitable person for the development of the business, he/she is the one who understands the
activity and can promote it further. Moreover, by being part of the investment, he/she has
high chances to convey confidence in the investment offer. The trader investor must be
helped by means of a concrete plan of collaboration and by means of the resources necessary
for a professional promotion of the service.
The helpless investor.
Do you know the person who has everything because he/she has successful parents
and is looking for a profitable activity to prove to themselves and to their family that they are
capable of doing something as well? Well, they all form the behavioural pattern of the
helpless investor. The profile is a benevolent one, with sufficient capital for investment, who
does not know much and who wants at any price to be part of the investment activity. So far
nothing wrong. Moreover, the helpless investor is usually part of circles which include many
other helpless investors.
The power of example of such an investor can lead to a massive business development.
Again, nothing wrong in that. But, the impossibility of the helpless investor to understand the
operation of the activity, the fact that certain risks must be assumed, the fact that financial
losses are part of the investment activity, the fact that they only want profit and are afraid of
losses, all these make the helpless investor achieve the most complicated long-term
investment. Usually the decision is already taken in the case of the helpless investor, the
refusal coming from the tenderer in enough cases.
2.12. The generous and secretive investor.
After the implementation of an investment plan and the passage of several time stages,
although contended with the efficiency obtained, the investor's behaviour is different. You
would expect a satisfied person to recommend that profitable service to friends and
acquaintances. I do not know what is the right thing to do but I would personally do that. I
included all these in the behavioural pattern of the generous investor. But I found that
although they are perfectly contended, there are investors who do not tell to anyone about
their success. I called them secretive investors and I tried to identify their motivation.
The generous investor.
Once he/she is satisfied with the efficiency of his/her investment, after confirming that
he/she receives from the investment service what he/she has contracted, the generous investor
makes recommendations. He/she is generous with both the investment service provider as
well as with the people to whom he/she recommends this service. I have found that, to
become part of this pattern, investors need a longer or shorter time, depending on their own
criteria. Regardless of the length of time, the generous investor alone recommends the service
once he/she is happy with it. He/she does not need a trigger for recommendations. However,
over time, there were people who proved to be more willing to make recommendations, once
the provider has offered them a financial advantage. The generous investor is an important
part of the organic development of the business. Its actions can be positively influenced by
communication, the granting of certain logistical or financial advantages.
The secretive investor.
I was surprised to find out that from certain partners for whom I made investment
plans that have brought them substantial profits over time, I did not get any new clients. After
testing them in various ways to find out if they were satisfied, I always received positive
feedback but no recommendations. This intrigue prompted me to investigate the
phenomenon, finding that there are several possible motivations. I found out every time that a
negative human trait was paramount and represented a reason for blocking recommendations,
whether it was in direct relation with the investor or with the persons to whom the
recommendation could be directed.
The first and most common reason is that the investor simply does not want his/her
friends to be aware that the investor has money, makes investments and makes a profit. One
of them even confirmed to me: "if I do this, all my friends will come and ask me to borrow
them money", in the context where he/she has several millions of dollars invested.
Believe it or not, the family secret of the investment made comes second as
motivation. Spouses who have made investments without the consent of the wife or spouses
who put aside money produced in the couple, are very common cases, which of course cannot
generate recommendations. The confidentiality of investment contracts makes these cases
possible and is first and foremost the most important aspect of financial services.
Another reason for recommendations blocking is related to the persons to whom the
investor could have made those recommendations. "I could have brought you x here, he/she
has more money than me but he/she is such a difficult person that I simply do not want to put
you in a complicate situation." Thanking him/her, I got rid of complications. The fourth
reason identified in relation to the blocking of recommendations is that of people who simply
do not make recommendations. As a result of negative experiences from their past,
recommendation is no longer a possible action.
One partner told me: "every time I did something good, I received something bad in
exchange, so I stopped." After all, the experiences of each person can determine to a large
extent the belongingness to this typology.
2.13. The investor who is never an investor.
The pattern of the investor who is never an investor is my favourite typology. The
reason is that I would always prefer to never have to deal with these people. This pattern
represents the maximum deviation from the profile of an investor. Making an investment
means essentially blocking capital, making expenses, taking a risk and, consequently, making
a profit after a long period of time. As will be seen as follows, the pattern of the investor who
is never an investor involves the removal or nonacceptance of one or more of the above
The first category refers to those who want to invest the capital of others. For some,
the reason is clear. They do not own that capital but would like to get the expected profit. For
others the motivation is more hidden, they do not want to take the risks of investing with their
own capital, so they are looking for opportunities to invest the others’ money.
The second category, usually found in people with higher amounts of capital, are those
who want to make an investment with their own capital but do not want to accept any
expenses. They want to look for third parties or companies to pay their expenses, legally or
not. Experience shows that the larger the amounts of capital invested are, the more obvious
this trend is.
The third category is that of the investor who owns capital, agrees to make the
expenses related to the investment, but does not want to take any risk. For this, he/she seeks
all kinds of subterfuges through which others could take over the risk of the investment. I am
surprised to find that important names of known investors slip away in the face of risk, thus
cancelling without even knowing their status of investor.
The fourth category, in the extreme, is that of the investor who wants to make the
investment, has the necessary capital but does not want to make any expenses and does not
want to risk any cent. Eager to make a profit from the risk taken by others, these investors
represent a large part of business people who have collected illicit profits and are accustomed
to illegality.
All the people who fit the above patterns have received the general name of investors
who are never investors because invariably they receive from me a negative answer
accompanied by a warm thought of "success!"
3. Investor’s fears.
In this second part of the article, I will identify the main fears of the investor, the ways
of recognizing these fears and the measures by which these fears can be removed or managed
so as not to produce negative emotions or stress during the investment. Without being
misunderstood, the combating of the investor's fears, as presented below, is not intended to
hide certain aspects of the investment process, with the proper sizing of all the elements so
that the investor can benefit from an investment without any stress or negative emotion.
3.1. The fear of losing money.
The fear of losing money is the most well-known of the fears presented in this article,
but it is not the most common fear among investors. By definition an investor is the person
who owns a certain capital and is willing to take a certain risk, perfectly known and
measurable before the investment is initiated. In other words, the investor is by definition a
person already willing to lose an amount of money in order to benefit from the possibility of
making a profit.
The fundamental principle that basically underpins the solving of all investor’s fears is
the one according to which an investor never invests more than he/she allows him/herself to
lose. The notion of risk involves assuming the possibility of losing the money invested. As
long as the risked amount is lower than the amount that the investor can lose without
suffering emotional or other kind of consequences, the fear of losing money should not settle
in and consequently should have no emotional effect. However, very often there are cases of
investors who risk more than they can lose, driven by the promise of a higher profit,
obviously, directly proportional to the risk measure.
The fear of losing money may exist in the initiation and contracting phase of the
investment, if the investor wishes to risk amounts of capital higher than his/her psychological
or even material and logistical possibility of loss. An experienced mature investor will not do
this. But beginners, by thinking only of the desired level of profit, often have a tendency to
risk more than they afford. A service for investors must identify this fear before contracting
the investment itself and guide the investor towards the investment option that falls within
his/her limits of affordability.
The fear of losing money can easily be identified in direct discussions with the
investor during which he/she is presented with the possibility that the X amount of capital
may disappear from his/her account due to the depreciation of the investment, under
unforeseen market conditions. This direct approach will instantly produce negative emotions
in the investor's mind, emotions that can be immediately detected in the dialogue. However,
it should be noted that no one wants to lose money. That is why the investor's emotions in
such a test must be carefully measured. Most of the time, his/her answers to questions like
"what would you do if you lost the X amount in an unfavourable situation?" Investors who do
not have an answer or scenario to this question may be in difficulty. Those who respond after
the pattern "well didn't you say I can't lose?" also show specific signs of the fear of losing
money. They would gladly pass the risk into the hands of another in cases of loss, while
enjoying only the profit.
The fear of losing money can also occur during the course of an investment. There
are cases where, after appropriate periods of accumulation of profit, investors increase the
percentage of risk by thinking through extrapolation and generalization that the good period
will continue for a while. In such cases the investor loses focus on the amount of capital
he/she allocates to the risk. In such cases, when markets evolve unexpectedly, investors may
find themselves facing exaggerated capital exposures, greater than their chances of losing.
The fear of losing money settles in instantly and most of the times the investor can no longer
think logically and clearly. Most often he/she is looking for quick solutions to resolve the
situation which may usually lead to higher losses. In order to avoid such situations, the
investment assistance service must constantly inform the investor about the amounts of
capital associated with the risk.
The fear of losing money as a result of the risk assumed in the investment is higher if
the investor's experience is smaller, if the unexpected situations he/she has gone through are
less numerous and if he/she understands less the functionality of the investment plan.
Therefore, the functional measures to reduce the fear of losing money are based on
informative actions in relation to the investment system itself, and on the results obtained by
him/her in similar episodes from the past.
Experience shows that the fear of losing money completely disappears after about 2-3
years of investments in which the risk has been properly sized. Thus, experienced investors
will watch the passage of crises and mitigation of risks as an action movie with an already
known ending. Not infrequently, experienced investors who seek to cover losses in functional
financial investment plans benefit from positive and constructive emotions, which increase
the return on investment each time. We note that in this paper, the fear of losing money was
associated only with the losses caused by the assumed risk. Obviously, in case of financial
investments, capital losses can occur for other reasons, all of which being subject to other
categories of fears presented below.
3.2. The fear of being deceived.
From my point of view the fear of being deceived is the main fear in the field of
financial investments. This fear refers to the hypothesis that the investor could be fooled by
being drawn into a hypothetical investment and someone else could simply run away with
his/her money. Fear is justified, as long as such events have taken place over time.
In order to eliminate this fear, we paid attention only to those financial services that
are carried out with the capital deposited in the investor's accounts. Thus, nobody and nothing
can reach the working capital, the investor having complete control over his/her funds. In
these investments, where the capital is in the investor's account, the fear of being deceived is
excluded from the beginning.
3.3. The fear of hidden costs.
The fear of hidden costs refers to the situation in which the investor would be
attracted to an activity in which the expenses that he/she must bear are not clear from the
beginning. This fear can be identified during the discussions in which the investor insists on
what he/she has to pay. The fear is justified, especially since the banking system nowadays
hides a whole series of costs from the initial offer presented to the clients.
To eliminate this fear, we have always recommended a clear offer, in which each
element of the chapter on costs and obligations of each party is explained in detail. The
reading of the contract assisting the investment must bring light to the investor’s mind, each
of the costs being explicitly presented. When it comes to collaborations involving other
institutions, such as banks or brokerage houses, the total costs of the collaboration will of
course depend on the commissions and fees charged by them. As banks or brokerage houses
can modify commissions without problems, such changes must be taken into account because
they can significantly affect the efficiency of the investment. This is one of the reasons why
brokerage houses that have a low level of commissions and that do not usually change the
fees related to the activity will always be preferred.
3.4. The fear of unprofitability.
The fear of unprofitability appears in case of investors who have not understood
exactly how the investment works, where the profit comes from, namely what is the balance
of income and expenses of the activity and what risk is involved to achieve efficiency. First
of all, the fear of unprofitability stems from misinformation and misunderstanding. After
several stages of information, it is found that the fear of non-profitability continues in case of
certain subjects. Although from a logical point of view they understood how things were
going and what would be done during the investment, as a result of unpleasant experiences
from the past, the fear of unprofitability caused them to always think about questions like
"and yet, what if we won’t make a profit?”. For some, the fear of unprofitability turns into the
fear of the unknown, discussed below: "what if something unexpected happens?"
The fear of unprofitability can be easily recognized by the fact that, in the information
stages, the investor is very careful about the efficiency level and about how the efficiency has
changed in time in case of certain investments made by others under the same conditions. In
the best case, quite rarely encountered actually, the fear of unprofitability can be recognized
by means of the fact that the investor is more concerned with the level of risk than with the
profit that could be achieved.
Such a case denotes a substantial life experience and is probably the position in which
each investor should be brought before the implementation of the investment plan. In this
position, the investor judging the level of risk will reach much easier the situation in which
he/she does not risk more than he/she can lose. Be careful! This sentence does not refer to the
amount of capital that the investor owns and could invest, but to the amount of money he/she
can lose without suffering negative emotions that would cause him/her stress.
Experience shows that the amount that each individual can lose without stress is
different from one person to another, depending on the value of the wealth but not directly
proportional. Each individual has his/her own emotional criteria and measures, his/her own
negative experiences from the past, and individuals with the same amount of available capital
certainly do not have the same amount they could lose without developing destructive
emotions. One of the hardest things to estimate before an investment is this amount, the
capital that the investor could lose without suffering any significant stress. There are
mathematical methods for calculating the level of risk aversion, but their applicability
undergoes subjective transformations.
I found many times that investors who claimed that they could easily lose 10% of
their invested capital, in the event of stock market crashes, although they knew clearly that
the risk was limited to the value indicated by them, began to express negative emotional
manifestations when the exposure exceeded 3-4%. In such cases the level of the risk assumed
by them exceeded the limit of the amount of capital that investors could lose without
developing stress. At the same time, I found that every investor, regardless of their
experiences, certainly has a psychological threshold below which he/she can lose money
without suffering significant negative emotions.
3.5. The fear of the unknown.
As I stated in the previous paragraph, the fear of the unknown may arise primarily
due to noninformation or incomplete information about the investment plan and the activity
to be carried out. However, it has been found that even after careful information, there are
investors who still show a fear of the unknown. This is especially the case of the
inexperienced, who did not have the previous experience of a profitable investment of the
same kind. "What if something that you didn't think about comes up?" they ask themselves.
The implementation in the business plan of functional measures for the protection of
the capital which, in any unforeseen case, would offer the possibility of limiting or
recovering the possible losses is a measure that helps to control the fear of the unknown. But
the mere existence of these measures is sometimes not sufficient. For some investors, the fear
of the unknown disappears only after they go through an experience in which a certain
unforeseen factor causes a disturbance in the investment activity, and by applying the
prepared measures, the system manages to limit or even recover the possible losses. After
such experiences, the fear of the unknown is diminished significantly, and not infrequently,
after such positive experiences, the investor even gives up the detailed analysis of the
investment, reaching an overview mature approach.
3.6. The fear of lack of control.
The fear of lack of control refers to the anguish of some investors who imagine that
they may be caught in an investment and forced to be part of the activity although at one
point they do not want this anymore. The main reason why they would not want this is
usually the unprofitability of the investment. The investor generally wants to have complete
control over the investment, to decide alone on the actions he/she takes with his/her capital.
We all know that large investments, for example in the real estate field, involve the
blocking of the capital for a long time. This would not necessarily be a problem, since we are
analysing the case of some investors, but the investor's inability to sell that real estate
whenever he/she wants would cause him/her a stress that could even be a negative
motivational factor when discussing the investment plan.
In case of financial investments, the fear of lack of control refers to the fact that certain
contractual clauses may block or restrict the investor to exit the investment for some time.
Such limitations are the most unproductive possible clauses that can exist in an investment
plan. That is why I always recommend concluding unconditional contracts, where the
investor can exit the investment at any time, obviously assuming the related risk and the
costs, if any.
3.7. The fear of crises.
The fear of (financial) crises is a common fear of the investors. At first glance it can be
considered part of the fear of the unknown and/or part of the fear of unprofitability.
Moreover, it can be considered a consequence of the fear of losing money. However, the
practice shows that the fear of crises is a fear by itself.
To explain you, let us consider an investor for whom the risk level has been granted
based on his/her own psychological stress threshold, he/she is well informed, knows that the
risk is limited and that the losses can be recovered, has the experience of similar events from
the past and suddenly wakes up in the middle a crisis caused by a new, unexplained reason,
which causes panic in the markets and which makes the evolution of prices unprecedented.
The best example: the crisis caused by the Covid- 19 virus (ironic Koliva-Virus), a crisis
during which I finish writing this material.
In these conditions the prices are at an all-time minimum level, all the mathematical
indicators show an unprecedented probability of increase in all prices, therefore the artificial
intelligence system that I administer buys massively. The phone rings incessantly. In the
multitude of messages coming from the investors I collaborate with, I can read: "your
software buys!", "It is an unprecedented crisis, could we not close the investment plan for a
while?", "Everyone sells, could we not sell too? why do we buy?" and so on. I reaffirm that
most of us are experienced investors who have gone through crises, which were caused by
other reasons.
After 2-3 days, when profits between 0.6 and 1.9% entered the accounts, depending on
the capital invested and the risk assumed, the messages stopped coming. I found that
experienced investors show symptoms of fear of crises every time a new crisis occurs. We
get rid of the fear of crises if we only look at mathematical truths. Crises are usually
generalizations of human panic and fear. At such times logical thinking disappears. I often
ask in the midst of a crisis: when everyone sells, isn't someone buying everything that is
sold? And those who buy, might they have another reason than the fact that they can buy very
cheaply? In crises, the transfer of ownership is made at low prices, from those who are
scared, to those who keep calm. Profitability is achieved by those who manage to control the
fear of crises.
3.8. The fear of artificial intelligence.
I identified this kind of fear in the investment activity assisted by an artificial
intelligence software. There are experienced investors who have obtained significant profits
over time but without the involvement of the computer. They have an anxiety about the
investment software, all the more so as they do not understand the principles based on which
this software operates. "What if the software gets crazy?"
I often explain that we use algorithms precisely because they always give us the same
result. As it is a logical sequence of mathematical formulas, an algorithm will always produce
the same response, as long as it receives the same input data. "I see! What if one day the
algorithm receives incorrect data? Let's just say that one day the internet works badly and
gives you the wrong prices. I explain that we never trust data and data sources, that many
validations are done before an artificial intelligence software generates a purchase order.
Before sending the order to the brokerage firm's computer system, the volume of shares to be
purchased is again validated according to the available capital of each account.
The only functional way to mitigate and control the fear of artificial intelligence is to
test the software and to demonstrate that the respective software has worked properly years
before. When an investor sees the results of the last five or ten years, he/she can conclude that
the software is functional.
3.9. The fear of a too low risk.
The fear of too low risk is a funny anguish from my point of view. It is a fear that
does not produce dysfunctional negative emotions, but rather the frustration of the investor,
who thinks that part of his/her capital is unused while he/she could make a higher profit. I do
not know if this is a sign of avarice, but the fear of too low risk is more often seen in case of
those with higher capital. The investment system I manage uses fifty investment channels.
The software divides the working capital into fifty parts and looks for opportunities on
several capital markets, in order to allocate to each part of the capital thus divided a profitable
activity. Depending on the risk assigned by the investor, there may be 10, 20, 30 or even 50
simultaneous transactions. Of course, there are days when only 5 opportunities are identified,
as there are days when 40 opportunities are identified. On the days when the system uses a
small number of investment channels, some investors are worried that the risk used might be
too low.
Psychologically speaking, they think they have capital that produces nothing.
Basically, the existence of a small number of open transactions shows that on all the other
available channels, the opportunities identified would have involved a greater risk than the
one admitted by the investor. This is the main filter that holds the unused capital. We prefer
not to gain anything, instead of assuming an exaggerated risk. There are three investor
actions in relation to financial investments. He/she can buy, sell, or wait for a better time to
identify a lower risk.
Experience shows that the fear of a too low risk never disappears for certain
investors. Although involved in an investment managed by artificial intelligence, they are
trying in parallel to make other investments, initiating positions exactly when the software is
waiting. I have sometimes been asked to find solutions to cover such positions that have
become unprofitable.
Instead of conclusion: don't risk more than you can lose.
Full-text available
After several attempts to publish my Ph.D. thesis with different prestigious publishers, I have decided to make this work public and free of charge for anyone. Enjoy! Cristian Păuna
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