Monday, 5 June 2017

Four Kinds of Investors

What are your attitude in saving little amount of money from income? Your individuality keeps you away from gaining more wealth.

Investors in our society are classified into 4 sectors:

A) Aggressive: These are gamblers who are always driven by the dreams of  earning higher returns. The higher the risk, the greater is the adrenalin rush for the aggressive personality. Not too good at taking advice, they take responsibility for their actions. These can manage their own portfolios and take risks beyond their capacity. They invest in high-risk instruments and try to time the market to maximise gains. They overexpose themselves in equities even when the goals are short-term. These investors are so confident about the prospects that they do not diversify to mitigate the risk which could affect their goals. To minimise the risk, they need to set realistic and achievable goals. 

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B) Passive: Safety is main priority to these people. These are careful to fault and rarely take any risks. These investors consider all options but end up putting their money in debt products like fixed deposits, provident fund, traditional life insurance schemes, etc as comfortable with low risks and predictable returns. They lack the confidence to take a decision even after understanding the pros and cons of other assets. Often money stays in bank account or in long-term assets. These cannot create significant wealth as inflation eats into their returns and the power compounding does not work for them.

C) Procrastinator: These are lazy investors. These possess enough knowledge and money in the bank  but postpone investing decisions in search of the best price. For these, it's best time to start immediately. These need frequent motivation to work upon their savings. 

D) Ignorant: These investors are forever waiting for others to tell them what to do because they know next to nothing about the market and are not willing to put in the effort to educate themselves. They fall for convincing lectures called Financial Advisors. No knowledge on markets, their portfolio depends on the objectivity and trustworthiness of the adviser. They are shaken when loss hits them. Hence end up financial road map of their friends instead of investing as per their own goals. These need to have financial literacy. Avoid tips from friends and colleagues, better to take help of financial planner. 


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