The Follower
The Follower is an investor who is passive and often lacks interest in and/or has little aptitude for money or investing. Follower investors typically do not have their own ideas about investing. Rather, they may follow the lead of their friends and colleagues, or whatever general investing fad is occurring, to make their investment decisions. Often their decision-making process does not involve a long-term plan. They sometimes trick themselves into thinking they are smart or talented in the investment realm when an investment decision works out, which can lead to unwarranted risk-seeking behavior. Since Followers don’t tend to have their own ideas about investing, they may also react differently when presented more than once with the same investment proposal; that is, the way something is presented (framed) can make them think and act differently. They may also regret not being in the latest investment fad and end up investing at exactly the wrong time, when valuations are the highest.
BASIC ORIENTATION
General lack of interest in money and investing and typically desires direction when making financial decisions
DOMINANT BIAS
Cognitive, relating to following behavior
IMPACTFUL BIAS
Recency and framing
INVESTING STYLE
Passive
RISK LEVEL
Generally lower than average but often thinks risk tolerance level is higher than it is
Credit to Michael Pompain’s “Behavioral Finance and Investor Types”, © 2012 CFA Institute