Spring is the season during which the natural world revives and reinvigorates after the colder winter months. During spring, dormant plants begin to grow again, new seedlings sprout out of the ground and hibernating animals awake. This could be the right time to reflect on our investor behaviours and refocus our approaches for a better financial outcome in the future. This begs the question, what investor type are you? The article recommends that we all aspire to be straight arrow investors. Let’s start by identifying a few personality types.
The Bailard, Biehl and Kaiser (BB&K) investor personality model classifies investors into five distinct categories namely Adventurers, Celebrities, Guardians, Individualists and Straight Arrows. The classification is made based on two major dimensions. These being the level of confidence with which an individual makes decisions (ranging from anxious to confident) and their approach to decision making (ranging from careful to impulsive). download bitdefender terbaru So this test acts as a reflection of the individual’s behaviour in various aspects of their lives, including investing and money management.
The first investor personality type is that of the individualist. Such people are fiercely independent and prefer to make their own decisions as far as possible. They carefully analyse and weigh up the pros and cons of each potential option available to them before making a decision. This rational approach to decision making allows them to make decisions with a reasonable degree of confidence. But at the same time, they may tend to analyse things a little too much therefore occasionally leading to a gap between thought and action. This may mean that they may lose out on opportunities that are ideal for them, owing to the delay in initiating action.
Adventurers on the other hand are highly confident and more willing to take risks. They would have no problems staking a substantial portion of what they have into a single idea or opportunity, if they find that there could be something beneficial in it for them. But they are highly unlikely to listen to wise counsel and they exhibit a high degree of impulsiveness when making decisions.
Investors with the celebrity personality type usually have the confidence to take on risks, but carry the inherent fear of missing out on a given opportunity. They try to participate in every investment opportunity that comes their way, regardless of whether or not the opportunity is ideally suited to their needs. They therefore willingly listen to and get influenced by any investment advice, be it from formal or informal sources. Therefore, the biggest risk faced by such investors is that of falling into the hands of unscrupulous advisors. This could see them make some extremely ill informed decisions which come back to haunt them.
Investors of the guardian personality type are in many ways the polar opposites of those with a celebrity personality. Guardians usually encompass senior, more mature and prudent investors. They are those who are more likely to have created significant wealth and therefore looking to protect it. They therefore prioritise capital preservation over maximising returns and actively seek out investment advisors as prudent as they are and well-reasoned investment advice.
This leaves the final kind of investor personality, the straight arrows. Investors in this category are usually the most well balanced and display a near perfect mix of confidence when acting on decisions and prudence when arriving at them.
Such a balanced approach to investment decision making means that their investment behaviour has very few weaknesses of note, if any. Therefore their investment behaviour can be considered to be ideal, even for the other categories of investors prescribed by the model.
Straight arrows are halfway between complete confidence and anxiety, and extreme carefulness and impetuousness.
Final Thoughts
We should all aspire to be straight arrows investors by being carefully aware of our decision making habits. These good habits are a great foundation towards a blossoming financial future.
