Portfolio Psychology

Vetting the Questionnaires


To write this article, I filled out many questionnaires. Most pegged me as comfortable with moderate risk. But Barclays also measured my angst about short-term volatility (my "composure") and fear of a portfolio meltdown (my "market engagement"—see chart, right).

PROFILEBarclays nailed my desire to take some long-term risk in the market but picked up on the fact that I'm more likely to become "unsettled by short-term fluctuations in portfolio values than most individuals" and worry about "accidentally taking on more risk than appropriate for [my] level of risk tolerance."

PRESCRIPTIONBarclays screened for funds with returns less volatile than the benchmarks they tracked. One "large-cap core" fund, for example, would make 8.8% if the Russell 1000 made 10%, but lose only 6.5% if it fell 10%. My willingness to delegate to an adviser will "mitigate or prevent the damaging cognitive biases" that could come from my being a nervous investor, Barclays said—and ensure I take enough risk.
Ben levisohn photo
Levisohn is a staff editor at BusinessWeek covering finance and personal finance.

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