What type of investor are you? Come, let’s find out.
TABLE OF CONTENTS
Every investor has their own goals, and no two investors are alike.
They come with their own unique expectations. And the level of risk they can tolerate also varies greatly. But despite these many differences, it is possible to group similar investors into distinct categories.
In fact, risk profiles are one of the most common ways to classify investors. A risk profile is simply an analysis of how much risk an investor can take, and how willing they are to take it.
Based on this, we have 5 types of investors.
Interesting, right? Wonder what kind of an investor you are? Let’s take a look at the different categories, so you can see which one sounds like you.
The defensive investor
Defensive investors are most comfortable when they take no risk. The objective here is to greatly minimize the risk of losing their capital, even if it comes at the cost of low returns.
Characteristics of a defensive investor:
- Prioritizes capital protection over capital appreciation
- Willing to take negligent, almost zero risk
- Prefers investment that do not fluctuate much in value
- Generally chooses short-term investments
The conservative investor
The conservative investor is a slightly more aggressive version of the defensive investor. People in this category may be willing to take low levels of risk, in exchange for earning modest returns.
Characteristics of a conservative investor:
- Prioritizes capital protection, but is also interested in capital appreciation
- Willing to take some amount of low risk with investments
- Prefers investments that are relatively stable
- May choose investments that offer guaranteed returns or regular income
The balanced investor
The balanced investor falls right in the middle of the spectrum. These investors tend to juggle risk and rewards almost equally.
Characteristics of a balanced investor:
- Aims to strike a balances between capital protection and capital appreciation
- Open to taking modest amounts of risk in order to enjoy capital growth
- Generally adopts a medium-term outlook for their portfolio
- Chooses a near-equal mix of low-risk and high-risk investment options
The growth investor
The growth investor, as the name indicates, is primarily interested in growth. These investors may want to preserve a part of their capital, but are willing to take on investment risks if it comes with the potential for growth.
Characteristics of a growth investor:
- Prioritizes capital appreciation greatly, but may also be focused on capital protection
- Has a moderately high risk appetite
- Generally willing to risk short-term losses for the prospect of long-term gains
- Interested in long-term investments
The aggressive growth investor
Investors in this category aim for aggressive growth over all else. They are not afraid to invest in high-risk investments that offer the potential for huge gains.
Characteristics of an aggressive growth investor:
- Prioritizes capital appreciation over capital protection
- Willing to take higher risk and experience market volatility for potentially higher returns
- Remains unaffected by short-term market fluctuations
- Interested in long-term investments, often with tenures greater than 10 years or so
So, do you relate to any particular category of investors? Remember that with time, your investor profile will also change. For example, while you could be more growth-oriented today, you could become a more conservative investor 10 years later. That’s very common. Just keep in mind though, that you need to periodically revisit what type of investor you are, so you can plan your investments accordingly.
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