A financial advisor is meeting with a potential new client. His client begins the meeting by outlining his investment ph

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A financial advisor is meeting with a potential new client. His
client begins the meeting by outlining his investment philosophy as
shown below. Describe the behavioral finance concept that most
directly illustrates each of the following investment philosophy
statement. Explain your answers. Also briefly discuss how each of
the statements can be countered using one conventional (i.e.,
traditional) finance argument.
Client's Investment
philosophy
Statement number
statement
1 -

Income needs should be met
entirely through interest income and cash dividends. All
equity held should pay cash dividends.
2 -

I will direct the purchase of
investments, including derivative securities, periodically. These
aggressive investments result from personal research and may not
prove consistent with my investment policy. I have not kept records
on the performance or similar past investments, but I have had some
“big winners”.
3 -

If an investment falls below the purchase
price, that security should be retained until it returns to its
original cost. Conversely, I prefer to take quick profits on
successful investments.