Updated: December 4, 2013
Last week, I gave everyone a “Personality Quiz” that will help determine what type of investor you are.
If you missed it, then you can go and take the quiz HERE now.
The quiz was just a series of five-questions, but each one is meant to test you on three aspects – readiness to invest, financial education and risk mindset.
I’ll discuss each one first, and then give you more details about the results.
Readiness To Invest
Before you invest, it’s important that you are first financially protected – this means you already have an emergency fund, among other things – thus the question of how long can you survive without work.
You should not invest on things that you don’t understand. I asked some questions about the stock market to determine how well you know the most popular high-risk investment in the country.
How prepared are you to handle risk? Do you panic when you see paper losses? Can you stay calm when the market crashes? I explored these in some of the questions.
Caveat emptor: I created this quiz “just for fun” and should not be taken as financial advice. Banks and investment companies can give you a more comprehensive test to see what type of investor you really are.
After around five days of quiz-taking, and more than a thousand respondents later – the investor profile of the readers of Ready To Be Rich shows this:
It’s interesting to see that the five types of investors are almost evenly spread out, with Defensive and Conservative investors taking almost half of the pie.
But anyway, enough of this result and more on the types of investors.
You are probably a new investor and still learning the ins and outs of investing. Your biggest fear when investing is to make a mistake, so take your time, study and learn more about it.
Invest in knowledge and increase your understanding about the different types of investments. In the meantime, you can put your money in low-risk investments such as time deposits, fixed income, money market and other short-term funds.
You are someone who would rather be safe than sorry. Your main concern when investing is security. And would rather invest in products with sure, but small returns, than risk losing your money in the future, despite better potential returns.
Define your investment objectives. What do you want to spend your money on and when do you need it? To buy a house five years from now? For your child’s college education seven years from today?
There’s nothing wrong with putting your money in safe or low-risk investments. But if you’re planning to use the money after at least five years, then you can safely put it in moderate and high-risk investments such as balanced and equity funds.
You have a good attitude towards investing and understand that sometimes you win, and sometimes you lose. You are willing to risk short-term losses for the prospect of higher long-term returns. Maintain that healthy attitude and keep investing.
Being a balanced investor is good. I was this type of investor for many years and it has served me well. If I were to give you just one advice, it would be to start exploring entrepreneurship and see how you can put up your own business.
You have big dreams and willing to experience the ups and downs of the market for the potential of great returns. Keep your motivation and optimism, don’t forget to regularly monitor your investments and I’m sure you’ll reach your financial goals.
I’m a growth investor and I’ve learned that it’s important to focus on your investing objectives to avoid losses from high-risk investments, which probably makes up a large part of your portfolio. What does this mean?
If, for example, your goal is to buy a new car worth P1M and your stock portfolio has reached that value, then sell your shares already instead of hoping for it to grow further. Don’t let greed stop you from buying what you want and actually enjoying life.
Lastly, going into business is the best next step for you. You can also consider real estate investing if you want to build some passive income.
You’re driven and passionate about wealth, and willing to risk whatever is needed to achieve your financial goals. As long as you’re properly protected with emergency funds and insurance, then you’re okay in my book.
As mentioned – be sure that you’re properly protected. But also, just like my advice for Growth investors, you should not let greed control your investing decisions. Stick with your plan and sell when you reach your target.
And if you don’t have your own business yet, then you should really have one. Put your drive and passion to the ultimate challenge by becoming an entrepreneur.
Which Type of Investor Is The Best?
None. Each one has their own strengths and weaknesses – and what’s important is that you are the type of investor that you need to be to achieve your goals.
What does this mean?
If I’m earning P1M every month and my goal is to retire to a simple life in the province, then being a Defensive or Conservative investor is okay, because putting my money in low-risk investments would be sufficient to achieve my goal for the future.
On the other hand, if I want to become a real estate tycoon, then I should learn to be a Growth or Aggressive investor, because my chances of achieving that goal is higher if I learn how to properly manage high-risk investments.
Personal finance is personal – that’s what I always say.
Learn to design your life according to your terms and you’ll surely achieve your goals for yourself and your family.