Everyone loves to learn something about himself/herself. This is exactly what we will do in this blog. We will look into your inner investor. Learn what kind of investor you are and what biases you may hold. I am really enthusiastic about this topic and cannot wait to share this knowledge with you. We will start with reviewing standard classification and definitions and then look into some alternative classification. When you look through them you will notice that they are quite similar and based on ability to take a decision, risk tolerance and handle information.
Please keep in mind that with age and change in financial situation your personality type may shift and will not stay the same over whole life.
What you should take from Part 1 and Part 2 approximate investor type you are and start self analysing some personal biases that my cloud your investment jugment. Also start to think, how you could avoid these errors. Quite a few can be avoided with preparing IPS, which I have reviewed in my previous blog (Link)
What type of investor you are?
There are four generic personality types:
- Cautious Investors
- Methodical Investors
- Spontaneous Investors
- Individualist Investors
Cautious investors are generally averse to potential losses. This aversion may be a consequence of your current financial situation or of various life experiences, but mostly you may exhibit a strong need for financial security. Being a Cautious investor usually results in a desire for low-volatility investments with little potential for loss of principal. Although you generally do not like making your own decisions, you are not easily persuaded by others and often choose not to seek professional advice. You dislike losing even small amounts of money and seldom rush into investments. As a result, you may often miss opportunities because of over analysis or fear of taking action. Your investment portfolios generally exhibit low turnover and low volatility.
Methodical Investors: Continue reading →