What Type Of Investor Are You?

It is always good to know what type of investor are you, so that you can adjust your strategy, develop your own rules, and stick to those rules to grow your money. Let’s look at different type of investors below:

Value Investing

If you are the type who does not care about the ups and downs of the market, and are willing to hold on to a stock almost forever, then consider yourself a value investor.

A value investor will look at stock which are deeply undervalue by looking at things such as low price to earnings ratio, low price to book ratio, book value, high dividend yields and good business model. The most important characteristics of a value investor, is that he/she will read the financial statements of the company inside out, follow the company’s development as close as possible.

Why hold the stock forever? If you have read my previous post, a classic example would be looking at Macdonald. If you have bought the stock 20 years ago, your total return up until today is about a whopping 991%.

Momentum investing

If you are a type of investor who like to invest in stocks that have consistent high return, and will only hold on to the stocks for short term (3-12 months). And the strategy that you adopt is to buy high and sell higher. Then consider yourself a momentum investor.

Momentum investing is considered high risk, as the stock price might come crashing down fast once it has a reported a bad earning or hit with bad news.

Index investing

If you are the type who are not interested in investing in companies, but are only interested in investing in a market. You can consider invest your money in asset such as Electronic Traded Fund (ETF).

One of the most well-known ETF is SPDR S&P 500 ETF. It tracks the movement of one of the most famous index known as S&P 500 index. The index reflects the performance of the 500 biggest US companies.

Index Investing is considered low risk as the asset is diversified accordingly depending on the selected ETF.

Trader

If you are the type who likes to sit in front of a computer screen, and monitor the stocks using fundamental and technical analysis on a day to day basis, and trade stocks on a short term basis (1 week to 3 months). Consider yourself a trader.

A trader will employ different strategies to hedge his/her position; magnify the returns using instruments such as Options, CFDs and margin trading. The trading profile of such is considered the highest risk.

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