Chapter 25 is where all the theory from the entire book gets applied to actual people. Well, fictional people. But they feel real enough that you will probably recognize yourself or someone you know in one of them.
After 20 chapters of learning about individual biases, Pompian finally gets to the big question: so what do you actually DO with all this knowledge?
This is it. Chapter 15 of Behavioral Finance and Investor Types by Michael M. Pompian is where everything comes together. All those chapters about biases, personality types, asset classes, and financial planning? They were building up to this. The final chapter answers the obvious question: okay, I know my investor type, now what do I actually do with my portfolio?
Chapter 13 of Behavioral Finance and Investor Types by Michael M. Pompian is about the single most important investment decision you will ever make. Not which stocks to buy. Not when to buy them. It is about how you split your money across different types of investments. That is asset allocation.
So you picked your ideal portfolio. Good stocks, some bonds, maybe real estate. Everything is balanced perfectly. Now what? Do you just sit there and never touch it again?
This is a retelling of Chapter 6, Part 2 (sections 6.7-6.9) from “Behavioral Finance for Private Banking” by Thorsten Hens, Enrico G. De Giorgi, and Kremena K. Bachmann (Wiley, 2018).