What Type of Investor are You?

26 Oct 2017 | Back to Blog

We’ve learnt over the years that there are a few different types of investors. There are no one-size-fits-all financial solutions. Knowing the kind of investor you are can help you understand your strengths, as well as the potential pitfalls you might face as you invest. It will also help you to catch yourself in the act, correct behaviours, and know when to stop by and talk to your Wealth Advisor.

The Set-it-and-Forget-it Investor

The set-it-and-forget-it investor’s most important tool is the standing order. Contributions to your investment funds are automated. They come out of your paycheque or transactional account on a certain day each month. You don’t pay close attention to the markets, or even the short-term ups and downs in your investments.

The upside for the set-it-and-forget-it is that you invest regularly, not based on how cash-rich you are at the end of the month, or your mood. This is a habit worth keeping! The downside however for this investing type is that you may not be paying close enough attention to whether your investments are meeting your current goals. Rebalance at least once a year, by meeting with your Wealth Advisor to transfer funds so you have the appropriate mix of stocks and bonds. Ensure you are participating in the best performing funds based on your current goals and time horizon.

The Market Observer

The market observer is tuned into the news, reads the financial papers regularly, and looks out for emailers and newsletters with the most current market news. You know just what’s happening at the Jamaica Stock Exchange and can go on for hours about business trends. You know how much your portfolio is worth down to the cents.

The upside for the market observer is that you’re informed when it comes to your investments. You’re probably more likely to get wind of investment opportunities, like IPOs, and are open to taking risks. The downside however, is that you may sometimes tend towards being an overactive trader. Your tendency to check the markets daily can lead to the temptation of trying to play the markets. Tread carefully. Take a step back and remember that investments are for the long haul. Plus, too much buying and selling can lead to an unnecessary accumulation of trading fees.

The Casual Adjuster

The casual adjuster exists somewhere between the set-it-and-forget-it investor and the market observer. As a casual adjuster, you don’t pay close attention. You do check out the market and your returns from time to time, then transfer between funds based on how they are trending at the time. You might also call in or pop by to buy or sell some stocks based on something you heard, or a newspaper headline.

The upside for casual investors is they are not just running on autopilot. The downside however is that while it is good to make adjustments on occasion to meet your investment goals, it’s not a great idea to make arbitrary shifts in your portfolio. Something may be trending up or down when you take a snapshot, but might be telling a different story when you do a more long-term review.

The Single Basket Investor

The single basket investor tends to hold a disproportionate amount of stock in an individual company. This type tends to be a long-time investor who sticks to shares in a long-established company. You may also be an employee who has bought up a lot of the company’s stock over the years.

We’re sure you can imagine the downside here – it’s having all your eggs in one basket. Having too much of one stock in your portfolio can be risky. The stock could plateau, giving you little return. Or the company could experience scandal, product failure or a change in CEO that tanks its stock price. The upside in this instance is that you can still diversify, choosing a mix of assets that suit your goals.

The IPO Chaser

The IPO chaser does just that, you invest in mostly IPOs because it sounds like a good opportunity to get in on the ground floor. It allows you to participate in early run-ups in price for companies in high demand. While this may be true, no two IPOs are created equal, and companies about to IPO have less publicly accessible information, making them more difficult to analyse.

The upside is that, if you get it right, there is much opportunity to be gained from investing in initial public offerings. The downside is that while you are chasing after IPOs you may be missing out on great opportunities from established companies on the stock market, as well as bonds or other instruments. When you are looking at investing in an IPO, pay special attention to the performance of similar companies, as well as the strength of the management team and how they plan to use the funds. Consider the track record of the IPO’s underwriters. Make an effort to combine your IPO hunting with a search for other instruments, and include a conversation with your Wealth Advisor to ensure the portfolio you are building is suited to your goals.

The Bargain Shopper

The bargain shopper is on the prowl during a downturn, hoping to make gains when the stock bounces back.

The upside for the bargain hunter is that you have defied the terrible temptation to buy high and sell low that gets some investors because they panic. The downside however is that some bargain stocks are bargains for a reason. Look carefully at the company fundamentals and industry trends for your cheap stock, as well as the price-earnings (P/E) ratio, to check out the share’s price relative to the earnings per share.

The Serious Saver

The serious saver shares the dedication for the set-it-and-forget it, but is seriously risk averse. You have a decent emergency fund, but most or all of your money is in savings.

The upside for you is that you know how to cut spending and thrift with the best of them. The downside is that you haven’t given your money the opportunity to do some of the work. You might be earning 1% – if you are lucky – on your savings, versus putting your money in an instrument like a unit trust where you can get returns that average 6 or 7%. Remember that your money needs to compete with the forces of inflation if it is to serve you well in the future. What you need is conversation with a wealth planner about taking a little risk in order to improve your rewards.


Which one, or ones, are you?