WHAT TYPE OF INVESTOR ARE YOU?

Financial Temperament Survey
Financial Temperament Scoring

Recent academic research suggests temperaments have much to do with investment behavior and risk tolerance — and can be modified through education.

Temperaments

Some people are shy, while others are outgoing; some have good self-control, while others are impulsive. Temperaments are measures that provide important insights into preferences and behavior. Temperaments combine “nature” with “nurture.” We know that some people are shy by nature and others are outgoing because even babies exhibit shy or outgoing behavior. But we also know that shy babies do not always grow into shy adults. Nurture can help shy children overcome their shy nature. Moreover, temperaments are likely to change as people age.

This program utilizes the Keirsey Temperament Sorter® as our measure of temperament. It is based on Keirsey's temperament theory, and psychologists, counselors, and human-resources professionals have used it for more than twenty-five years. The Keirsey sorter classifies people in four basic temperament groups and sixteen temperament variants. The four basic temperament groups are Guardians, Artisans, Rationals, and Idealists, and brief descriptions follow:

• Guardians are the cornerstone of society, given to serving and preserving our most important social institutions. Guardians have natural talents in managing, and they use these talents to keep things running smoothly in families, communities, schools, churches, hospitals, and businesses. Guardians are cautious, loyal, and disciplined. They follow the rules and cooperate with others.
• Artisans have a natural ability to excel in any of the arts—fine arts, performing arts, athletics, the military, politics, mechanical and industrial arts, and the “art of the deal” in business. Artisans want to be where the action is; they are impulsive and competitive, and they believe that the next throw of the dice will be the lucky one. Above all, Artisans resist being tied, confined, or obligated; they would rather not wait, or save, or live for tomorrow.
• Idealists are passionately concerned with personal growth and development. Idealists strive to discover who they are and how they can become their best possible selves. And they want to help others make the journey. Idealists are naturally drawn to working with people, and whether in education or counseling, in social services or personnel work, in journalism or the ministry, they are gifted at helping others find their way in life, often inspiring them to grow as individuals and to fulfill their potentials.
• Rationals are problem-solving people. They might tackle problems in organic systems such as plants and animals, or in mechanical systems such as railroads and computers, or in social systems such as families and companies and governments. Rationals are rigorously logical and fiercely independent in their thinking. They are skeptical of all ideas, even their own. Often they are seen as cold and distant, but this is really the absorbed concentration they give to whatever problem they're working on.

Proportions of Temperaments in the General U.S. Population:

Source: Fairhurst and Fairhurst, table B1, p. 304.

What information helps you understand
how to invest more wisely?

Guardians respect the opinions of authority figures such as well-known investors and scholars. They prefer orderly and linear presentations supported by citation of facts and have the temperament to follow through.

“You're apt to play it too safe by keeping the bulk of your nest egg in cash or bonds—and risk being outpaced by
inflation. You also tend to hold too little in foreign issues: Guardians greatly prefer domestic stocks...determine if you
need more stock or foreign equities, which can actually decrease your overall risk by adding diversification.”

• Come up with specific goals
• Plot a long-term financial course
• Consider adding more foreign equities

Artisans prefer to learn by doing and appreciate opportunities for active involvement. They prefer anecdotes, humor,
and opportunities to ask questions, and “trust your gut” is how they prefer to make financial decisions.

“If discipline is your weak point, use automatic investing. And commit, say, no more than 10% of your assets to
satisfying your yen for gutsier bets.”

• Build a portfolio heavy in stocks, but research before you buy
• Diversify properly just in case “your gut” is wrong
• Understand impulse investing likely leads to too much risk

Idealists are nurturing and sincere and value highly personalized relationships. They prefer learning through the use
of metaphors and analogies, and they “tend to focus on improving society rather than building personal wealth.”

“Remember, you can do more for others if you're financially secure yourself. Launch a plan...that incorporates socially
responsible funds, and sign up for automatic investing and bill paying. If you find stocks too dicey, consider dividendpaying
stocks, which offer an income cushion.”

• Pay more attention to your finances
• Save and invest for the future
• Be aware of your tendency to avoid risk and invest too heavily in fixed-income assets

Rationals are in search of knowledge. They focus on the more theoretical features of investment and prefer
presentations in scholarly language with precise definitions. They can be a bit too sure of their ability to “outthink
the market,”—many lost badly when the tech stock bubble burst.

“You feel best about your finances when you're ‘successful at implementing a complex strategy.' You're also in the
group most likely to think you can outsmart the market. But remember, brains alone won't do the trick.”

• Be aware you are the most apt to take a lot of risk
• Keep your self confidence about investing in check
• Reduce risk by shifting a percentage of assets to bonds and cash

(Sources: Meir Statman, Ph.D. and Vincent Wood, CFA, Selected Excerpt from “Investment Temperament,”
The Journal of Investment Consulting 7 no. 1, Summer 2004, and Money, August 2005)

The sponsors wish to acknowledge AdvisorTeam for their work and our use of the temperament questionnaire.