When investing, you may come across several types of investors. They differ from each other mainly in their attitude to money.
Every person attaches a different meaning to money management. Some people just want to accumulate money in their bank account, others would like to make a lot of money. Some people are afraid to take risks, others leave large fluctuations cold. We present four basic types of investors that can be encountered most often. In addition to the attitude to money, they also differ from each other in the composition of the investment portfolio.
The ultra-conservative investor is only interested. Don’t lose money and save it in the most conservative banking products possible. The basic product range will include savings accounts, term deposits, building savings and possibly supplementary pension insurance. The last mentioned financial product will have been agreed by the ultraconservative investor perhaps only by chance, as no one told him that deposits in pension funds are not insured.
This type of investor will also have a negative relationship with credit unions. He still remembers how these financial institutions fell like flies after the rain at the turn of the 20th and 21st centuries. He doesn’t want to take any chances. He most likely has his money deposited with large banks.
The conservative and ultra-conservative investors are united by one great distaste and that they do not want to be further educated in financial matters. They consider studying the relevant literature, such as the book Saving or Investing, a waste of time.
A conservative investor has a similar composition of financial products as its ultra-conservative counterpart. But there is one difference between them. While the ultra-conservative investor has no idea about inflation, the conservative investor has at least heard of it and wants to value his money, at least for this invisible scarecrow.
Conservative investors can already be found investing in open-end mutual funds. Although these are only symbolic amounts and fund investments are not even represented in tenths of the total financial assets, conservative investors simply want such returns that cover inflation.
The third type of investor is one who wants to get an interesting return from his money, but does not want to take too much risk. When looking at fluctuations in the underlying assets, the balanced investor does not catch the accountant as an ultra-conservative investor, but he does not have to do too much volatility twice.
With certain constellations, a hint of a dynamic component such as stocks can be found in a balanced investor. A balanced investor is also clear about inflation. He wants to overcome it in the long run and at the same time get something extra from his money. The saying that money makes money is characteristic of this group of investors.
Sometimes dynamic investors are also called aggressive. You will recognize them by the fact that they are not afraid to invest a relatively large part of their financial assets in a highly risky investment. These investors are not afraid of stocks. As well as inflation, which they want to overcome at all costs and still make enough money on their investments. They are not afraid to take a risk that could be perceived as too high for a balanced investor. Dynamic investors will also tolerate the view of the long-term downward trend of their investment portfolio. Even when looking at the declining line marking the value of their assets, they do not fall into depression and usually still buy more shares or participation certificates.
Investors and stocks
All investors who have shares in their financial portfolios should hold them for at least one decade. The optimal investment horizon for shares is 25 years. When holding unit certificates of equity mutual funds, the duration should be at least five years.
Although we have imagined several basic types of investors, the information on what financial goals individual investors have planned and how long they want to invest will be much more important. The portfolio of a person who needs to use most of his money for housing in two years, even though he is a born dynamic investor, will look different, and the distribution of investments will look very different for a conservative investor who wants to overcome inflation in the long run.