One of the defining moments of 2021 is the mania that surrounded the trading of GameStop stock, Robinhood, and the WallStreetBets Reddit group that led the charge. For those of you not too familiar with it, you can click here to find out more.
What this shows is that when it comes to investing, not everyone is playing the same game. When making the decision to buy shares of stocks, bonds, mutual funds, ETFs or some other kinds of securities like options and puts, it is helpful to know what kind of investor you are. If you know this, then you can better invest in alignment with what you are trying to accomplish
Here are three kinds of investors in the market:
The Business Owner
You like the idea of creating a steady, productive portfolio. You are in this for the long haul and, while you know you will experience volatility, try to limit it where you can. That said, you don’t panic if prices drop temporarily; in fact, you may see that as an opportunity to buy more. Dividends and interest paying funds are attractive to you as these stocks and bonds derive value from them.
To put together a portfolio, you do a lot of work up front with little immediate returns (like starting a business). However, if you make good decisions and stay committed, you can reap large rewards down the road while letting the portfolio do the heavy lifting.
The Start-Up Guru
You are always looking for the next big thing. If you were to start a business, the best-case scenario would be for you to be bought out for a lot of money from one of the big guys. When it comes to stocks and bonds, you do not really care about dividends or interest payments – the bottom line is maximum growth of value.
To put together a portfolio, you spend a lot time researching trends and lesser-known companies who are putting together something big. The tech and biotech industries are of particular interest to you. In addition, a company that is doing revolutionary work may have some appeal. You can deal with some investments that fail if just a few pay off big because the goal is to cash out once you get a big offer.
You enjoy the rush of putting it on the line. You look at the market and think that you can figure out how to make a profit buying and selling stocks and bonds. You enjoy the challenge of outsmarting people around you and using that to your advantage.
You do not really have much interest in putting together a portfolio per se. The bottom line is have the value of your account be higher than when the day began. You do not really do much research into companies’ financials, but are more interested in statistics that predict where the price will move in the short-term future. Options and short selling are appealing strategies for you as well. To make money, you are okay working in the markets day to day and enjoying being active in it.
So what kind of investor are you? If you can answer that question, you can start to plan for the portfolio that matches your personality and make sure you are making moves that fit your preferences. If not, then maybe talking things over with a financial advisor at Phase 3 would be a good idea. We can help you design a portfolio that fits your personality and goals. Happy investing!