Some investors are naturally optimistic, while others may have the "glass-is-half-full" mindset. There's nothing wrong with either personality types, but depending on the type of person you are, there may be certain investment products that are more suited for you.
Investors can often be categorised into one of the below four categories:
Cautious investors display a very strong desire for certainty and financial security. They prefer safety over risk; certainty over uncertainty. They tend to avoid making their own investment decisions, but are seldom open for advice from professionals. This inability to make decisions can occasionally lead to missed opportunities. Once a cautious investor decides on a particular investment, they seldom change their minds or make adjustments to their portfolios.
Methodical investors are often seen as structured, process-driven thinkers. They can be very diligent in conducting investment research and often spend time pouring through data / financial reports. These investors tend to be very conservative, and often base their decisions on facts rather than emotions. Methodical investors do not make decisions lightly, and as a result, can sometimes be slow to react to new information.
Individualistic investors are individuals that are confident in their investment abilities, and often conduct their own research and make their own decisions. When faced with uncertainties, they will devote the time needed to find the solutions. Individualist investors seldom regret decisions they make, and have great confidence in their abilities to achieve their long-term investment objectives.
As its name suggests, spontaneous investors tend to change their minds easily, and are constantly adjusting their investment portfolios. They respond quickly to changing market conditions, and can feel uncomfortable when they aren't doing anything. As a consequence, spontaneous investors are often the victims of the latest rumors and speculations. They also tend to incur high cost from the constant switching of investments.
It's easy to determine your personality type. If you're unsure, a simple test online may help reveal it.
Once you know the personality group you belong to, you'll have a much better chance of avoiding making investment decisions that would make you feel uncomfortable.
For example, cautious investors tend to prefer cash and bond investments due to the certainty of these investments, while spontaneous investors would usually avoid these investments (as "certainty" is usually the last thing on their minds!).
Which personality group do you belong to?