Ten Investor Types – Which One Are You?
There are many different types of investors. Here are ten.
Maybe you can spot yourself.
The Newbie
Gets started in the stock market at a young age after clicking a Clickbait headline that led them to subscribe to a Premium Membership of CFD platform populated by AI-generated content and stock tips based on algorithms available only to Premium Members. Are quickly skinned alive losing their bar-earned ($28 an hour) $10,000 in a derivative they didn’t understand. They never come back and never go near the stock market ever again. Says "It's rigged" if the stock market ever comes up in conversation forever after.
The Plodder
This is your goody-two-shoes investor. Holds a portfolio of twenty very well-known brand name stocks and ten worthless penny stocks bought on 'tips' over the years and were never sold. Blames the person who tipped them for the loss and will never forget it. Focuses on franking. Quotes Warren Buffet. Banks are 40% of the portfolio because they were acquired in the float and never sold. Never trades. Never sells. Is appropriately inattentive. The fear of losing money to the tax office through capital gains has driven spectacular long-term annual compound returns. Lost a decade of performance in the global financial crisis but didn't do anything about it. Apart from that the only stress point was the banking inquiry. Never sold, couldn't, because everything was bought for 10 pence. Will leave millions to their undeserving kids who will cash it all in and live like Kings.
The Ten Bets Investor
A classic scattergun "with brains" investor. Has ten stocks, each bought for $50,000 each. One stock has gone to zero. Seven are worth between $45,000 and $55,000. One stock is worth $200,000. One stock is worth $2m. Focuses on resources exploration stocks, biotechs and new issues. No banks. No big blue chips. No yield. This is organised gambling, where a lot of work, information and networking narrows the odds.
The Zombie Investor
Is a stockbroker working on the Stockbrokers Creed that the way to get rich is to "
Find a stock with half an idea trading below a cent, put all your money into it and spend the rest of your broking career marketing it". Started with $50,000 and now has $1m in one stock. Next year it will be worth anything between zero and $10m. This is the investor who knows absolutely everything about a stock you’ve never heard of. Is in the top twenty shareholders. The first holding they bought cost less than a cent. Loses more than your mortgage on a one-cent move, and it moves two cents a day. Doesn’t sell on the spikes. Doesn’t sell on the troughs. This is a long term high-risk investment but they know all the risks. Only ever talk about their stock. They are never invited over for Christmas because the conversation always turns to "that stock". You can tell their marital status from the share price. They ring you up when they’re 60 to either (a) borrow some money or (b) to invite you to join them in the Bahamas.
The Daytrader
If they have $1,000 to their name they hold one stock worth $100,000, but they have to sell it by the end of the day. Pays the average salary in dealing costs every year. Highly stressed. Have a theory that works. often awake all night. Thinks everyone else is an idiot. Gets wiped out once a year by something unexpected, something not in the algorithm, something not their fault. High attrition rate. Only the devoted and the single, survive.
The Income Investor
Is investing in equities for income. Is rich. Made huge losses in the financial crisis but never sold “as long as they still pay the dividend”. May not have noticed the financial crisis. Hates the volatility. Is out of their depth when the stock market comes up. Wishes things would “just go back to the way they were”. Occasionally tempted by 5% in term deposits. Has $250,000 in six different bank accounts (the government's capital guarantee amount) as insurance against Armageddon.
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The Value Investor
Makes long-term declarations about stocks based on historical information and grand assumptions. Can explain everything but never trades, never sells and constantly says, "It's time in the market, not timing the market". Knows more Buffett quotes than actually exist. Needs 50 years to prove they are right. Usually are.
The Lone Ranger
An amateur trader who has given up their day job to trade the stock market. Will survive until they run out of money or wake up to the fact that trying to make $1,000 a day, even if successful, is a difficult, tough, demanding, soulless and ultimately boring existence.
The One Stock Trader
Has worked out that diversification is for people who don’t know what they’re doing. Is an independent thinker. Exploits the herd. Trades one stock again and again and again and again. Knows everything about that stock. Can reliably tell you what the next month's trend is going to be. Trades in between the points of maximum risk (results, AGM, signposts). Picks a company with a bottom left to top right chart. Chooses the stock based on size and volatility and finds the Goldilocks mixture of both. Occasionally sees a better stock with a more appropriate level of risk versus reward and swaps to that. Is vulnerable to once-in-a-lifetime events that happen regularly. Eventually learns to keep an eye on the market lest they lose sight of the wood for the tree.
The ETF Trader
After many years of trying to trade stocks has finally realised that their particular (low) risk (medium) reward Nirvana can be achieved by trading the market through index ETFs. No need to read any research about stocks. No need to read 99% of the Business section. All that matters is timing the market, which they do through vigilance and a combination of technical and fundamental “feel”. Is relaxed. Has realistic expectations and trades just five times a year. Has discovered that the best way to time the market is to read the Marcus Today newsletter.
Who did I miss?
More about the author – Marcus Padley
is a highly-recognised stockbroker and business media personality. He founded the
Marcus Today Stock Market Newsletter in 1998. Over the years, the business has built a community of like-minded investors who want to survive and thrive in the stock market. This is achieved through a combination of daily stock market education, ideas and activities.
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