When it comes to investing, there are many different types of investors in the stock market. Many people fall into a few different archetypes of how they make decisions on how they invest in the stock market.
In this article, we’re diving into what those different archetypes look like, their pros and cons, and how to balance your investment decision-making.
Investor Type #1: Information vs. Instinct
When it comes to investing, many people believe they have a “knack” for choosing good investments. But what exactly is that “knack” based on?
The fact is, the choices we make with our assets can be strongly influenced by factors, many of them emotional, that we may not even be aware of.
Investor Type #2: Deal du Jour
You’ve heard the whispers, the “next greatest thing” is out there, and you can get on board, but only if you hurry.
The prospect of being on the ground floor of the next big thing can be thrilling. But while there really are great new opportunities out there once in a while, those “hot new investments” can often go south quickly.
Jumping on board without all the information can be a bit like gambling in Vegas: the payoff could be huge, but so could the loss.
A shrewd investor will turn away from spur-of-the-moment trends and seek out solid, proven investments with consistent returns.
Investor Type #3: Risky Business
Many people claim not to be risk-takers, but that isn’t always the case. Most proficient investors aren’t reluctant to take a risk, they’re reluctant to accept a loss.
Yes, there’s a difference.
The first step is to establish what constitutes an acceptable risk by determining what you’re willing to lose. The second step is to always bear in mind the final outcome.
If taking a risk could help you retire five years sooner, would you take it? What if the loss involved working an extra ten years before retiring; is it still a good risk?
By weighing both the potential gain and the potential loss, while keeping your final goals in mind, you can more wisely assess what constitutes an acceptable risk.
Do you know one of these types of investors in the stock market?
Share this post with friends and family and see which investor type they are!
Investor Type #4: You can’t always know what’s coming.
Some types of investors in the stock market attempt to predict the future based on the past. As we all know, just because a stock rose yesterday, that doesn’t mean it will rise again today.
We know this, but often we “shrug off” this knowledge in favor of hunches.
Instead of stock picking, you can exercise a little caution and seek out investments with the potential for consistent returns.
Investor Type #5: The gut-driven investor.
Some investors tend to pull out of investments the moment they lose money, then invest again once they feel “driven” to do so.
While they may do some research, they are ultimately acting on impulse. This method of investing may result in huge losses.
Investor Type #6: Eliminating emotion.
Many investors “stir up” their investments when major events happen, including births, marriages, or deaths.
They seem to get a renewed interest in their stocks and/or begin to second-guess the effectiveness of their long-term plans. It’s a case of action-reaction: they invest in response to short-term needs instead of their long-term financial goals.
The more often this happens, the more incoherent their so-called “financial strategy” becomes. If the financial changes they make are really dramatic, it can lead to catastrophe.
Out of all of the different types of investors in the stock market, which are you?
Many times, there is no need to fix what isn’t broken or turn away from what they’ve done right. By enlisting the assistance of a qualified financial professional (and relying on their skill and expertise), you can be sure that investment decisions are based on facts and made to suit your long-term objectives rather than your personal, changing emotions or short-term needs.
As a fiduciary financial advisor, I’m able to take a 360-degree angle look at a financial plan to make sure that your investments decisions are in line with your long term financial goals.
If you feel you need to prepare more for the future or reexamine your existing investment strategy, I’d love to set up some time to chat.
We’re happy to work with you either in person, over the phone, or virtually, based on your preference. Give our office a call and we can schedule some time together.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.