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?