Not all Mexican food is created equal and neither are investors. Before you pull the trigger on investing your hard earned cash, you need to know what type of person you are. We’re not talking about what gender you identify with as you can figure this out on your own in the shower. You may, however, need help to figure out what kind of investor you are.
Figuring out what kind of investor you are will not only help you decide the best route to take to reach your goal but it will also make your days a lot more peaceful and stress free. Trust me there will come a day when it gets pretty ugly in the economy and you need to make sure you can handle those nasty days.
I usually break down the types of investors into 3 General categories:
- Aggressive Investor
This type of investor can handle more risk to get a high reward. They live by the motto “Go big or go home”. Needless to say they know what they’re doing and they can afford to take higher risks. So what does high risk mean? Does it mean take all your cash and head to Vegas?! Oh no boss! It just means that their portfolio would have more equity than debt. In other words, stocks would make up a higher percentage of their portfolio than bonds, or they may not have any bonds at all.
- Conservative investor
You guessed it right. They are the opposite of an aggressive investor and their portfolio tends to have more bonds than stocks. When they buy stocks they like to stick with the ETFs and also buy into more stable and solid sectors in the market.
- On the Edge investor
Those are the people who are smart enough to know that keeping their money in a savings account would hurt them in the long run because of inflation but they are also afraid to lose their money in the market. There’s nothing wrong with being the wannabe investor because it’s your money and only you should care. Those investors usually lean towards putting their money into CDs, Money Market funds, long term Bonds and if they want to go a little wild they start looking into rental properties as real estate usually appreciates over a long period of time.
What kind of investor should you be?
The only person who can answer that is you as you know yourself best and you’re also the only person who is fully aware of your financial situation. But here are some questions you can ask yourself.
Am I going to be able to sleep at night regardless of what happens in the market?
If you answer No then there’s no need for more questions as you are an on the edge investor. If you answer yes, then you’re either an aggressive or conservative investor.