What is a Barefoot Pilgrim

Barefoot pilgrim is a slang term for an unsophisticated investor who loses all their wealth by trading equities in the stock market. A barefoot pilgrim is someone who has taken on more risk than necessary or entered investments carelessly, without doing the proper research. 

BREAKING DOWN Barefoot Pilgrim

A barefoot pilgrim is someone who has lost everything, right down to his shoes, because of their poor investment choices. Becoming a barefoot pilgrim is akin to losing your shirt. A sophisticated professional investor might condescendingly refer to a non-professional investor they perceive as naive, as a barefoot pilgrim. A barefoot pilgrim's trading decisions could be viewed as on par with gambling. 

A barefoot pilgrim tends to violate the risk/return maxim that an investor shouldn't take on more risk than necessary to achieve their required return. An investor requiring a 3% return, for example should invest in Treasury securities, not the higher risk stock market, and an investor desiring an 8% return should invest in the S&P 500 Index, not in more volatile emerging markets.

The ever-increasing availability of news on the stock market provides more headlines for a barefoot pilgrim to use as motivation to buy a security. This type of investor may also be defined as one who chases the latest fad, such as profitless Internet companies during the dot.com bubble, or early-stage biotechnology companies when the human genome was first sequenced. The novice investor gets caught up in the hype of an investment without bothering to research the fundamentals or the business model of a given stock.

Reducing Risk for a Barefoot Pilgrim

Some money managers equate any form of individual stock selection as speculation, rather than investing. Instead, they promote the ownership of stocks in packaged products such as mutual funds and exchange-traded funds that are professionally managed based on fundamental or factor-based research or passively benchmarked to a stock index. In both cases, the novice investor is gaining diversification and eliminating single-stock risk. Balanced, target-date and target-risk or lifestyle funds go even further by providing a professional asset allocation that is regularly balanced based on a different sets of risk tolerance guidelines such as conservative, moderate or aggressive.

If a novice investor does not want to manage their own investments, they can hire a financial advisor to do it for them. In today’s competitive market for financial advice, investors can gain basic guidance from advisors who charge by the trade, by the hour, by the amount of assets they manage or through a flat upfront fee. Investors can find an accredited advisor in their area by visiting organizations like NAPFA, the National Association of Personal Financial Advisors, or the website of their preferred bank or brokerage firm.