Choosing the Right Investments Based on Your Investor Personality
Undoubtedly, people (in Singapore or in any part of the world) have their own distinctive personalities. For this reason, people react differently in given situations, circumstances and difficulties, the same concept is valid and pertinent in investing.
As a newbie in the exciting world of investments, the most essential thing you should comprehend is your innate nature and the vital reasons why you would like to invest. The question, “what kind of investor am I?” should always be given a top priority to the other one, “what types of investments should I choose?”. Because the more you understand your innate nature and your individual exigencies and conditions, the more you can easily build-up an investment strategy that is fitting for you.
Usually, there are two acceptable methods to classify an investor personality:
Generally, younger investors in Singapore, who have an age group below 30, are equipped with a superior capacity to recuperate and to get through from short-term losses, because they can persevere in collecting wealth over the years by means of their steady and continuous work. Thus, they can normally sustain losses and fluctuations from extremely risky form of investments.
On the other hand, near-retiring investors, who have an age group between 50 and above, should undertake more conservative form of investments, because they can no longer depend on a steady employment income to compensate any investment losses.
Source and Concept of Wealth
The manner in which an investor has generated and accrued wealth can offer substantial indications on the investor’s capacity and risk appetite.
Wealth that has been produced via the usual entrepreneurial activities like the sale of a thriving business can be the result of a significant risk experience. Thus, such type of investor may reveal a major risk appetite.
Alternatively, a person who has accrued wealth by means of traditionalist and unadventurous spending and resourceful savings for a given number of years will surely show a much lesser risk appetite or tolerance for risk.
Another important thing to consider is an individual’s concept of wealth. Whether it involves a well-off or an unfortunate person, how you make out yourself in relation to your wealth is an essential factor in evaluating your risk appetite. Of course, individuals who deem that their wealth is highly insignificant (regardless of its real value) will naturally have a major need to uphold and maintain it.
Importance of Knowing Your Investor Personality
Understanding your investor personality is important because this can facilitate you in organising your portfolio structure, investment strategies and goals. Having a good notion of your investor personality will also guide you in choosing among different types of investment instruments.
Furthermore, an erroneous choice of investment instruments can also prove to be dear, expensive and can have a noteworthy effect to you financial and emotional condition, to your day to day quietude and comfort. By evaluating your type of investor personality, all the negative consequences that may arise from incorrect investment decisions and objectives can be avoided easily.
Have you ever wondered what type of investor are you?
If you learn something vital from this post, have a good look at, Essential Factors in Long-Term Wealth Accumulation.