Someone once asked me how I get into a pool. They wanted to know if I tippy toe in and take my time, if I get half way in then hesitate and consider getting back out or if I just run and jump into the deep end without ever getting a feel for the temperature of the water.
They were asking because the approach we take towards getting into a lake, ocean or pool can be directly correlated to our views on investing. That is if you believe your personality is a direct reflection on your investment strategy…which I do.
Once a conservative, always a conservative
People can watch the Business News Network all day and read The Wall Street Journal from front to back, but at the end of the day our investment choices come down to our emotions. Some can argue that they shouldn’t, but the truth is we can’t change who we are.
In my 16 years of working in banking I have yet to come across someone who’s investment strategy was completely polar opposite of their personality. If you’re conservative by nature I highly doubt you take high risks when it comes to your money and if you’re indecisive in your everyday life I can almost guarantee that you’ll be a balanced investor with a perfect mix between equity and income.
Control freaks and know-it-alls please check in here
As a financial planner I can often tell what type of investor someone is just by talking with them about their life for 10 minutes. It’s true. I can try to talk someone into adding a more aggressive mutual fund into their portfolio, but if they are shy and extremely cautious I would be wasting my breath, even if there are financial benefits.
If a person is a control freak who always likes to be in charge they are probably never going to pay for the professional advice of a financial planner because they prefer to make their own decisions. I am never offended by this, although I don’t agree with the decision, it’s a personal choice.
That’s why online direct discount brokerages exist. For all the ego maniacs out there who think they know more about building a well diversified investment portfolio than a professional who studied the subject for seven years. But like I said it doesn’t bother me.
Do your investments reflect your personality?
With all that being said, let’s go back to the original question about getting into the water. Which one are you and when you rationalize your answer with your money does your personality match with your investment style?
Of course buying investments shouldn’t be emotional, it should be a well thought out, well researched decision that takes into account your risk tolerance, time horizon and asset allocation.
However at the end of the day money options – whether spending, saving or investing – always come down to personal choices, don’t they?
Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
Totally agree with you. Personalities also affect our money making decisions in general. In my day job I do a lot of work with personality testing. We use the Meyers Briggs Indicator and DiSC quite a bit. Having your clients take these assessments may help you with their investment choices. Meyers Briggs is about your personality, which you’re born with, and DiSC is all about your behaviors – which you adapt over time. It’s pretty cool stuff, I’d suggest looking into it. Anyways, excellent post here — I love the analogy of the pool. It’s true, we make stupid emotional decisions based on who we are, instead of making sound, calculated investment decisions. Great call out.
That’s good to know. Thanks Chris.
Interesting article! I’ve always wondered what my portfolio says about me… I used to consider myself a “stock market cowboy” but now I’m more conservative.
I have a portfolio split of all ETFs. One is a short-term bond, another is a large-cap value and then a small-cap aggressive growth. I reallocate accordingly, since the value and growth ETFs tend to have different personalities.