What Kind of Investor Are You?

I found today's author Mr. Moneybags' through his blog BigFatMoneybags.com a little while back. His view on finance isn't necessarily the norm and I thought it was great. Moneybags take on finance adds a bit of humor in an atmosphere that can too often become stressful. Without further delay I present, Mr. Moneybags.

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What kind of investor are you? It’s a simple question really. Although, it is surprising how few people can answer that question due to their lack of investment strategy – these are the same people than end up collecting empty cans off of the sidewalk for spare change. Let’s take a look at the four prominent types of investors:

1. Buy-And-Hold (a.k.a. Comatose) Investor: Common traits include making a small amount of trades every year while perusing various wine tasting ceremonies and taking tours of box factories to make up the time in between trades.
2. More Active (or slightly less comatose) Investor: If you find yourself making a few trades every quarter while waxing your Volkswagen, you probably fit into this category.
3. Active Investor (a.k.a. Trader): Common traits include making multiple trades every week and driving mid-priced convertible sports cars which show off their bald spots as it gleams in the sunlight.
4. Day Trader: Rarely holding investments for longer than a day, making multiple trades everyday and tending to scream hysterically from the rush of making trades mixed with the effects of a concoction of illegal substances.

Which type of investor is the best?

It entirely depends on the kind of person you are and your investment strategy. If you have a series of heart attacks every time the DOW dips a few points or your holdings drop in price by a few pennies, you might not want to take up day trading. On the other hand, if you would rather jump out of a plane while on fire instead of going months between making trades, a long-term investment strategy wouldn’t be the right fit for you.

It’s one thing to want to be a day trader and another thing to actually successfully do it. You have to be completely honest with yourself and your abilities.

If you are new to the world of trading and investing, you are going to want to start at the top of that list as a Buy-And-Hold Investor and slowly move your way down to Day Trader. Typically, the more trades you make the more likely you are to screw up, that’s why I suggest to take things one step at a time.

Also, the more experience you rack up means the less you allow your emotions to play you like a piñata. You see, when you start investing you have no idea what you are doing - and it shows. New investors are the ones that start to panic at even whiffs of market turbulence, many end up harvesting their kidneys as a hedge against losses [Disclaimer: slight over-exaggeration].

As you gain experience, you learn how to take advantage of any moves in the market and your knowledge works as a safety blanket which you can always rely on, just like that one time you relied on your parents to bail you out of jail for smuggling a crate full of cheap vodka across the border. You will be more efficient at researching your investments and will be able to distinguish between vital information and useless information.

Multiple Investing Personality Disorder

Don’t forget that you can also utilize multiple investment strategies in one time, to get the best of all worlds - no one ever said that you can’t be a Day Trader AND a Buy-And-Hold Investor.

There is nothing stopping you from dipping your toe into various investment strategies to see which one suits you best, and there’s no better or more efficient way than by utilizing a few at once. Of course the problem is whether or not you have the necessary funds to get you to divvy up your portfolio into investable sums which is why a lot of people tend to avoid this route.

Another benefit of Multiple Investing Personality Disorder (term copyrighted by me), is the fact that it can serve as a tool for diversification. By diversifying your investment strategies you are mitigating the pitfalls that come with each investing system, of course you are also diluting the benefits as well, but for most people the added safety is worth it.

In the end

Remember, even experienced investors can end up working as greeters at Wal-Mart. Why?

Because they never developed sound investment strategies; instead of acting like Investors they were acting like Speculators. This is the crucial difference between the types of people that make money and lose money in the markets. You can find out more about these two personality types in this article.

You’ve probably heard the saying, “There is no such thing as stupid ideas, only stupid people.” Well, the exact same thing applies to investors: there is no such thing as a bad investment, there are only bad investors. Your investment strategy has to be built around you and not the other way around, otherwise it will be the equivalent of an unstoppable force meeting an immovable object: not much will happen.

Best,

Mr. Moneybags

BigFatMoneyBags.com

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Mr. Moneybags and his blog (www.BigFatMoneybags.com) are determined to prove to the world that the subject of money shouldn’t make you want to douse yourself in gasoline and run into a forest fire.

*The content posted above was written by a third party. The comments, claims, or opinions expressed therein are not necessarily those of INO or MarketClub and we are not responsible for the information provided in the post or on the author’s site.