PT  - JOURNAL ARTICLE
AU  - Denver H. Travis
AU  - Mehmet F. Dicle
TI  - Reluctant Investors: A Behavioral Experiment
AID  - 10.3905/jwm.2022.1.175
DP  - 2022 Jul 31
TA  - The Journal of Wealth Management
PG  - 115--131
VI  - 25
IP  - 2
4099  - https://pm-research.com/content/25/2/115.short
4100  - https://pm-research.com/content/25/2/115.full
AB  - Private wealth managers are often challenged to help reluctant clients make investment decisions in nondiscretionary accounts. Investors may be hesitant, or even too eager, about the price and timing of specific investments. This investor behavior challenges wealth managers on a daily basis. We designed an experiment to seek out remedies in the setting of a university student–managed investment fund with novice undergraduate student investors. Over 3 years, more than 400 investment decisions were made. More than 220 decisions would not have been made were it not for our suggested remedy. Our sample includes more than 100 individual investors and a portfolio size of $1 million in real funds. Our solution for hesitancy is offering cash covered puts for investment purchases and covered calls for investment liquidations. We find that having a third option of buying or selling with covered options largely alleviates decision-making anxiety for our sample investors. As a bonus, this option trading activity made the portfolio significantly more profitable during this 3-year experimental period from 2017 through 2019.