Are you someone that likes to run your family finances like a military operation? Do you have a spreadsheet that comes out every month to track your spending and bills with each row neatly colour coded? Or perhaps you’re someone that keeps a pile of bank letters in your bottom drawer, promising to sort out your savings as soon as the world slows down a bit?
Recognising your own good or bad financial habits is the first step towards defining clear investment goals, so in this article we’ve summarised some of the most common investment personality types. Which one are you?
THE SNAP DECISION MAKER
You have a wide range of investments assets but don’t have time to trawl through the internet looking for expert opinions, trying to decide which of these you can and can’t trust.
Your instincts have served you well in the past (most of the time at least), so you’re happy to trust yourself and run with whatever you think’s best. When the markets take a downturn, you’re likely to act emotionally and move your money if you feel things aren’t going to turn out well. As a result, you’re more likely to be a short-term investor.
Pros: You are more likely to respond quickly to what’s happening in the world.
Cons: Your gut instincts may not always be correct if you’re inexperienced and can often be a poor alternative to real market research, meaning you’ll miss out on potentially good long-term investment opportunities.
You’re careful with your money and you have a few years investment experience, but you know that some element of risk is involved if you want to make it grow.
You’re an avid reader of a select few financial columns and blogs, and are happy to act on investment stock tips from people you trust, which extends to your parents, who have always been financially savvy.
You don’t have the time or inclination to carry out detailed research into bonds, the performance of the FTSE 100 or ISAs, so choose to rely on those who have a good track record in these matters.
Pros: You’re acting on potentially good information from people you trust.
Cons: You’re not receiving professional investment advice suited to your individual circumstances and attitude to risk.
You like to seek out professional financial advice before making any decisions about where to put your money, and are always checking on the performance of your investments.
Despite your investments being made with a long-term outlook in mind, you can’t help monitoring them on a daily basis to make sure your future plans are on track.
Pros: You’ve taken professional advice to try to make the most of your savings.
Cons: You spend a lot of your time thinking and monitoring your money, and can lose sight of the long term approach to investment.
THE DIY ENTHUSIAST
You have an eclectic mix of investments, and like to put your fate in your own hands by drilling down into the relevant research yourself, ignoring what others have to say.
You understand your own circumstances and needs better than anyone, and are prepared to nail your colours to the mast. This is more appealing than trusting someone else’s opinion, whether that’s parents or professional financial advisers.
You keep a close eye out for the investment products and stocks you think are going to perform well. If a stock rises or falls quickly, you will typically buy it or sell it either way, hoping you’ve made a smart decision. You like to check your investments regularly and enjoy having a vice-like grip on your money.
Pros: You are in complete control of what you choose to invest in.
Cons: You are unlikely to be taking a whole of market view and may be ignoring worthwhile advice from professionals.
You’re aware of different investment strategies, but you feel that life is for living in the now, and there will always be another day to start planning for what lies ahead.
Your future will take care of itself. And while your finances are not really getting off the ground at the moment, you understand that one day you’ll need them to fly if you’re to have peace of mind, and plan for getting older or important life events.
Pros: You have one less thing to worry about just now.
Cons: You may regret your lack of action at some point in the future, by which time it may be too late to build up a suitable nest egg.
THE LIFELONG SAVER
You know that interest rates on savings accounts are currently below the rate of inflation, but you’re still too nervous to start investing, even if your money is starting to be eroded by inflation.
Even if interest rates were to fall below 0%, you’d find it hard to embrace investing as you think there’s just too much risk involved, and of course you’ve worked hard to build up your savings.
Saving money in a risk-free way is important to you, but you’re starting to get concerned that it’s becoming worth less in real terms every year.
Pros: Sticking to what you know can provide you with financial peace of mind.
Cons: Your savings may be starting to diminish and lose value.
Your friends and family don’t really talk openly about their money, so it’s a bit of an alien concept that you’d like to know more about.
But where to start? Some of the questions you have may include: What should I invest in? How much should I invest? Is there a chance I’ll lose all my money? How much could I expect to get back?
You’re aware that investing could turn out to be a good decision for you, but it’s one of those things you keep putting off as it seems so daunting.
Pros: Your savings aren’t exposed to any level of risk at the moment.
Cons: With interest rates so low, your money could be eroded by inflation in real time, so may not grow.
If any of these persona types seem familiar to you, then take some time to think about your own investments habits and consider how they align with your long-term financial goals. The Click & Invest blog is regularly updated with information for first-time investors, so sign up to receive our newsletter or follow us on Twitter for updates ahead of our launch.
The information in this article is for private circulation and is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgement as of this date and are subject to change. The information contained in this article does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors; therefore we strongly recommend you consult your Professional Adviser before taking any action. Copyright: Investec Click & Invest Limited. Reproduction prohibited without permission.