Before beginning to invest in the stock market, the investor needs to understand how they handle gains and losses that come with passive income. Some investors are “negative nellies” because they fear a downturn of stocks at every corner. These investors will have more bond allocation than stocks, and their stock portfolio will tend to be more in household staples and blue-chip stocks. Some investors are “perma-bulls” which means they are permanently bullish on stock market returns even in clear evidence of instability. However, accumulators can handle the pressure big-time and they can generate higher than average returns by putting themselves at risk.
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Four Investor Characteristics:
Preservers
Financial wet blankets. My husband and I are both preservers. We hold large sums of cash as our “emergency fund” primary because we end up collecting (like squirrels for winter) money since we hesitate almost any sudden financial movements until we’re near certain – the sad part is – nothing is certain.
Accumulators
Perma-bull types. Accumulators are usually natural born leaders. They are quick to pounce and confident enough to sway others in the process. Overconfidence can be proven to be some accumulators’ undoing.
Followers
Combine the uncertainty of the preservers with the greed of accumulators and you have followers. They tend to be the victims of ludacris runaway bubbles. These investors rely on peer influence than their own financial research. Followers are usually the ones left holding the baggage when the music stops.
Individualist
Highly methodical investors who demonstrate a strong understanding of finance and is able to stake a bet on it. Individuals are your doctors, engineers and successful business owners with a high attention to detail. They do not the second guess because they did their homework already. This can lead to overconfidence because individualists can unknowingly create feedback loops that are self-fulfilling.
Like I’ve mentioned before, my husband and I are preservers. It would seem like he has all the talents of an individualist just like his father and his grandfather but with one large exception. Anxious personality and a bias against action.
Hey, no love lost here. I’m the same way. We’re both careful people which comes with its own set of pros and cons.
It’s also important to note that everyone can be a varying degree of more than one archetype on a continuous spectrum with none completely adept at failure. For example: if a follower gets lucky enough following the right people, he could make some decent chump change with little work.
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So, which investor personality type(s) are you? Drop a comment below!
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These are 4 distinct groupings. Like you, I am part preserver and part individualist. As a preserver, I am cautious, but not obsessive about market volatility. As an individualist, I am a DYI researcher. I wonder if it is common for those two groups to overlap?
Dave recently posted…Emergency Preparation: Be Proactive
That was exactly what I was thinking Dave! I think so. A preserver wanting more control could become a better than investor if they honed their skills.
Your infographic is beautiful!!!! Super Pinterest viral worthy!!
My husband is an individualist/preserver, he spends HOURS (actually DAYS to weeks) reading up on certain companies before investing in it- and when he does he invests a big chunk. It was McCormick the spice company a few months ago and now it’s an elevator company.
I don’t think I fit into any of these personality traits, but perhaps if I had to pick it would be a preserver.
GYM recently posted…The Ultimate Recipe for FIRE (Financial Independence Retire Early)
Hehe thanks Ms Gym!!! Lucky duck for a husband, how is McCormick doing? We all need spices 🙂
I think Mr. FAF and I are preservers too. We like to save a lot for the future. We want to balance saving money with enjoying life, but saving and investing is the way to go.
I think you guys are too!
I’m not sure what group I’m in. Where would you put the guy who puts every available dollar in equity index funds and forgets about it under all circumstances?
Every available dollar?! Accumulators!
I would not say I’m overconfident. That’s where I was struggling. The alternative to my strategy is trying to time the market which rarely works out.
I’m not actually sure which category I fit into the best. Definitely not the preserver though, I hate having cash sitting around! I do have my emergency fund but have had to talk myself out of investing that many times and usually only have a cushion of $100-$200 in my bank account.
I’m careful with my investments and don’t take any crazy risks on anything but do like to at least have my money in the market. I’m also not a big fan of researching stocks, so I usually stick with either big companies, ETF’s or funds.
Sarah | Smile & Conquer recently posted…Choose Your Budgeting Adventure
Actually Sarah you sound just like a preserver! Careful enough to test waters.
Not sure where I fit either. I will save for months, keep reviewing various stocks and their financials and then one day I just decide to invest it all! Almost compulsive.
Caroline recently posted…Managing Your Money: Needs vs. Wants
Lol sounds like me! There’s a spectrum going on (:
I think I might be an individualist… interesting
Mrs. Adventure Rich recently posted…Emergency Preparation Up North
I knew it!!
I think I’ve been all 4 of these!
I know right! Great answer Amy!
I think I’m both a preserver and a individualist. I like to research funds I may want to invest in and like to be safe in all of my investments. I want to pick them on my own and don’t want to rely on an advisor. This helps me get more educated in what I’m invested in.
Kris recently posted…Getting Ready for a Natural Disaster
I think you are both too Kris!