What is your investor personality type?

Different investors have different personality types leading to different ways of how they position their portfolios. The following are four of the most common investor personality types. Which one is yours?

Cautious Investors – Cautious investors are generally averse to potential losses. This aversion may be a consequence of their current financial situation or of various life experiences, but most exhibit a strong need for financial security. Cautious investors usually desire low-volatility investments with little potential for loss of principal. Although these individuals generally do not like making their own decisions, they are not easily persuaded by others and often choose not to seek professional advice. Cautious investors dislike losing even small amounts of money and seldom rush into investments. They often miss opportunities because of over analysis or fear of taking action. Their investment portfolios generally exhibit low turnover and low volatility.

Methodical Investors – This group relies on ‘hard facts.’ Methodical investors may intently follow market analysts or undertake research on trading strategies. Even when their hard work is rewarded, they typically remain on a quest for new and better information. Their reliance on analysis and database histories generally keeps them from developing emotional attachments to investment positions, and their discipline makes them relatively conservative investors.

Spontaneous Investors – Spontaneous investors are constantly readjusting their portfolio allocations and holdings. With every new development in the marketplace, they fear a negative consequence. Although spontaneous investors generally acknowledge that they are not investment experts, they doubt all investment advice and external management decisions. They are over-managers; their portfolio turnover ratios are the higher of any personality type. Although some investors in this group are successful, most experience below-average returns. Their investment profits are often offset by the commission and trading charges generated by second guessing and frequent adjustment of portfolio positions. Spontaneous investors are quick to make decisions on investment trades and generally are more concerned with missing an investment trend than with their portfolio’s level of risk.

Individual Investors – This group has a self-assured approach to investing. Individualists gain information from a variety of sources and are not averse to devoting the time needed to reconcile conflicting data from their trusted sources. They are also not afraid to exhibit investment independence in taking a course of action. Individualist investors place a great deal of faith in hard work and insight and have confidence that their long term investment objectives will be achieved.