WARREN BUFFET AND DONALD TRUMP: TWO FAMOUS INVESTORS WITH TWO VERY DIFFERENT APPROACHES TO INVESTING. BUFFET IS KNOWN FOR HIS THOROUGH RESEARCH AND TENDENCY TO “STAY THE COURSE,” WHEREAS TRUMP HAS THE REPUTATION OF AN IMPULSIVE RISK-TAKER WITH A MORE AGGRESSIVE STYLE.
How would you describe yourself as an investor? If you’re struggling to come up with the right words, we can help you determine your personal investing style – and how you can use that knowledge to influence your investing decisions.
CONSIDER YOUR RESPONSES TO THE FOLLOWING SCENARIOS:
When it comes to investing, would you rather
- Preserve your account balance as much as possible; or
- Take a chance on the unknown for an opportunity at a bigger return
You’re traveling internationally. Do you:
- Stick to the safety of tourist attractions and only order food you can get back home; or
- Explore the off-beaten path and try every local dish at the restaurants you visit.
The market is experiencing a run-up. Do you:
- Sell off assets immediately to protect your principal – you know that what goes up, must come down; or
- Stick to your investment strategy and “let it ride” – you’re confident the market will go even higher!
You’re re-evaluating your investment lineup and think it’s time to add a new fund. Would you rather:
- Buy a fund based on its ability to generate a steady income; or
- Buy a fund based solely on the potential growth it can generate.
During parties or social gatherings, do you:
- Spend time with the few people in attendance that you know, or even keep to yourself; or
- Blossom into the social butterfly that you are with the goal of meeting as many new people as possible.
The market is experiencing a pullback. Do you:
- Rush to move the majority of your investments into cash and cash equivalents; or
- Take this opportunity to buy, buy, buy.
RESULTS + NEXT STEPS
YOU ANSWERED MOSTLY 1’s: CHANCES ARE YOU’RE MORE CONSERVATIVE IN LIFE AS WELL AS AN INVESTOR. YOU LIKELY YEARN FOR FINANCIAL SECURITY MUCH MORE THAN POTENTIAL RETURNS ON YOUR INVESTMENTS, AND YOU’RE PROBABLY NOT KNOWN FOR GAMBLING WITH YOUR NEST EGG.
Here are three ways you can use this knowledge for the greater good:
1. Focus on the big picture (i.e. your long-term retirement and investing goals) versus a play-by-play of your portfolio’s performance.
2. Concentrate on what you can control, such as your savings rate and plans for retirement, versus what you can’t (e.g. the market). Have your investment advisor show you how you’re progressing toward your retirement goals and how your chances of success might increase based on certain changes to your portfolio.
3. Make sure that your investment strategy takes into account any changes in your personal situation (e.g. marriage or the birth of a child) and that you’re regularly re-evaluating your feelings about risk.
YOU ANSWERED MOSTLY 2’s: YOU LIKELY EMBRACE THE MORE ADVENTUROUS SIDE OF YOUR PERSONALITY, AND ONE MIGHT ASSUME THAT AS AN INVESTOR YOU SEEK PERFORMANCE AND HIGH RETURNS ABOVE ALL ELSE – AND YOU’RE NOT AFRAID TO TAKE THE RISKS TO GET THERE.
HERE ARE THREE WAYS YOU CAN MAKE SURE YOUR INVESTING STRATEGY IS THE RIGHT ONE FOR YOU:
1. When evaluating your portfolio, compare your investments to the most relevant benchmarks – not everything can or should be related to the S&P 500. Like the more conservative investor, concentrate on what you can control, such as your savings rate and plans for retirement, versus what you can’t (e.g. the market).
2. Have your investment advisor show you how you’re progressing toward your retirement goals and how your chances of success might increase based on certain changes to your portfolio.
3. Resist the urge to make changes to your investments as a result of market movements. It’s okay to keep an eye on fund performance, but avoid trying to chase returns or make short-term fund decisions – instead, stick with the funds that perform consistently over time and that support your long-term goals.
WHERE YOU FALL ON THE SPECTRUM OF INVESTOR TYPES GREATLY INFLUENCES YOUR INVESTING DECISIONS. IT’S IMPORTANT TO KNOW WHERE YOU STAND SO THAT THE CHOICES YOU MAKE ARE BASED ON WHO YOU ARE AND YOUR UNIQUE SITUATION – AND THAT YOU TAKE THE LEAST AMOUNT OF RISK NECESSARY TO MEET YOUR GOALS.