Your personality traits may keep you from getting the most out of your money.
AGGRESSIVE:
What are the traits?
The higher the risk, the greater is the adrenalin rush for the aggressive personality. They are the gamblers who are driven by the dream of earning high returns. Not too good at taking advice, they take responsibility for their action.
How do they invest?
Aggressive investors actively manage their portfolios and take risks beyond their capacity. They invest in high-risk instruments and try to time the market to maximum gains. They over-expose themselves to equities when the goals are short-term, “These investors are so over-confident about the prospects of their investments that they do not want to diversify to mitigate the risk, which could affect their goals.”
How can the risks be overcome?
“Such risk-takers can even lose their principal.” To minimize risk, they need to set realistic and achievable goals. Investing in equity for long-term goals and debt funds for short-term goals is a sensible option. “Have a good exit strategy place. Use your aggressive approach in profit booking as well.”
PROCRASTINATOR:
What are the traits?
The lazy ones. They lack the motivation to act on the overload of information they are privy to and lose out on opportunities in the process.
How do they invest?
“Procrastinators possess enough knowledge and money in the bank but they just postpone investing decisions in search of that best price.” Since they try to time the market or just can’t decide where to invest, they lose out on the power of compounding.
How can the risks be overcome?
“A procrastinator needs to decide to start somewhere. There will never be a perfect time.” For such investors, it’s best to start immediately.
PASSIVE:
What are the traits?
Confrontation and conflicts are not for such people. Safety is paramount. They are careful to a fault and rarely take any risks.
How do they invest?
Passive investors consider all options but end up putting their money in debt products like fixed deposits, Provident Funds, or traditional life insurance schemes, etc; as they are comfortable with low risks and predictable returns. They lack the confidence to make a decision even after understanding the pros and cons of other senses. Often money stays in the bank account or in long-term assets. They don’t bother to review the performance of investments or align these with family goals.
How can the risks be overcome?
Passive investors cannot create significant wealth as inflation eats into their returns and the power of compounding does not work for them. Turning to a financial adviser to find ways to align goals with investments can be a start. “While executing investments based on advice, start small but be decisive. Understand the benefits of the recommended investment products. These small steps will make the investing journey less risky.”
IGNORANT:
What are the traits?
They are forever waiting for others to tell them what to do because they know next to nothing about the matter on hand and are not willing to put effort into educating themselves.
How do they invest?
Ignorant investors fall for convincing lectures by so-called advisers. “They have no information about the markets. Their portfolio strength depends on the objectivity and trustworthiness of the adviser.” They don’t know what is happening to their investments till the losses hit home. They end up following the financial roadmap of their friends instead of investing as per their own goals.
How can the risks be overcome?
The ignorant investor needs to become financially literate. They should take the help of a financial planner to guide them in achieving their goals and follow the plan diligently, instead of acting on tips from friends and colleagues.
