Mar­ket play­ers should get ac­quainted with their “in­vest­ment per­son­al­ity”

Moose Jaw - - Bizworld - By Ron Wal­ter For Moose Jaw Ex­press

New in­vestors in the stock mar­ket have many op­tions nowa­days from let­ting a ro­bot choose their in­vest­ments to dis­count bro­ker do-it-your­self, full ser­vice hu­man con­tact to mu­tual fund man­agers. Ev­ery in­vestor should know a few ba­sic per­son­al­ity traits be­fore em­bark­ing into the stock mar­ket.

First trait: know what kind of in­vest­ment per­son­al­ity you have and tai­lor your in­vest­ments ac­cord­ingly.

Most bro­kers and banks have in­vest­ment per­son­al­ity tests to score where on the range of risk tol­er­ance you fit. Or find one on­line.

In­vest­ment per­son­al­i­ties break down into three ba­sic cat­e­gories: in­vestors, spec­u­la­tors and gam­blers.

The in­vestor is a small-c con­ser­va­tive who only buys into a near sure things like blue chip div­i­dend pay­ing stocks with sound fi­nances and long track records.

The spec­u­la­tor will take on higher lev­els of risk than the in­vestor. The spec­u­la­tors will care­fully, they be­lieve, cal­cu­late the chance of suc­cess for an in­vest­ment and make de­ci­sions based on that in­for­ma­tion. The gam­bler is just that: a player seek­ing thrills and chas­ing rain­bows with no real con­cern about the fi­nances of a com­pany or the sec­tor.

In the clas­sic fa­ble, the race be­tween the hare and the tor­toise, the gam­bler would in­stantly bet heav­ily on the hare.

The in­vestor would bet on the tor­toise, pre­fer­ring slow and steady, while the spec­u­la­tor would cal­cu­late speeds and other fac­tors be­fore mak­ing a de­ci­sion, pos­si­bly bet­ting on both.

In to­day’s high-priced untested cannabis stock mar­ket, the in­vestor shakes his or her head and stays out of that game. The spec­u­la­tor will try and de­ter­mine a present or fu­ture value, if pos­si­ble, based on all the un­cer­tain es­ti­mated vari­ables while the gam­bler will plunge in be­cause “it can only go up.”

Your in­vest­ment per­son­al­ity can change based on your age and need to con­serve your nest egg, and ac­cu­mu­la­tion of wealth that of­fers the abil­ity to take more risk, or on not hav­ing any­thing to lose.

Rule Num­ber One for some in­vestors is: Don’t lose any money. Ditto for Rules Two and Three.

But you will lose money at times. Ev­ery­body does. The goal is to keep losses small and rack up more gains than losses over time. If you can’t sleep with that no­tion you might be bet­ter off stay­ing out of the mar­ket.

Sec­ond trait: de­velop a strat­egy based on your in­vest­ment per­son­al­ity and stick with it.

Three styles of in­vest­ment strat­egy in­volve value in­vest­ing, growth at a rea­son­able price in­vest­ing and mo­men­tum in­vest­ing.

Low­est risk of loss should be from value in­vest­ing, al­though some­times good deals are too good. An­nual re­turn on in­vest­ment is less too.

Greater risk of loss comes with growth at a rea­son­able price in­vest­ing where in­vestors hunt for com­pa­nies that will grow and gain value with­out over­pay­ing. This style should in­crease the per­cent­age re­turn. Mo­men­tum in­vestors can be suc­cess­ful if they pay close at­ten­tion and trade a lot. Many spend a lot of sleep­less nights, or time re-build­ing a stake to try again. A vet­eran in­vestor may com­bine the tech­niques and tools of all three styles at var­i­ous stages of mar­ket cy­cles.

There is no one so­lu­tion to in­vest­ing suc­cess. Ev­ery time you think you have scoped out the mar­ket it will throw another curve at you — mak­ing the mar­ket frus­trat­ing and fas­ci­nat­ing.

Ron Wal­ter can be reached at ron­joy@ sask­

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