Why We Are All a Little Crazy When It Comes To Investing…

 
Is it really possible to know someone with a 10-question investment survey?

After being a financial advisor for 20 years, what I’ve found is that everyone is a little crazy when it comes to their portfolios. And that’s because we’re all trying to accomplish so many things. We want growth and income and security, all at the same time. We have multiple-personalities when it comes to our money – and it’s okay, if not totally normal.

So who are these guys inside your head and what do they want?

Upbeat Alan / Positive Patty
Alan is optimistic about the future and feels that “there is always a bull market somewhere.”  He is comfortable with owning a portfolio of individual stocks, and is looking for the new opportunities. Alan wants to “invest in solutions, not problems” and thinks of himself as a “big picture” investor. He is also patient and can wait through a few short-term losses in exchange for potentially higher growth.

Dividend Dave / Income Ingrid
David has some experience with investing over the years and is looking for a combination of growth and income from his portfolio. He is not looking for a lot of excitement out of his investments. In fact, he sleeps a little better at night knowing that his portfolio is in relatively blue-chip holdings. He’s been through some of the “ups and downs” of the market, and is willing to hold onto stocks for the long-term.

Typical Tom / Average Amy
Tom has a busy work and family life.  He knows that he needs to grow his assets for retirement, but doesn’t want to be bothered with the day-to-day details. So, his approach has always been to find a few good, diversified mutual funds and check in on their performance periodically.

Engineer Arnold / Mathy Martha
Arnold is a smart guy, and has learned that it can be hard to beat the market over the long-term. As a result, he is focused on keeping his investment costs to a minimum.  He wonders if there is a “smarter” way to invest in index funds, and knows that a good investment strategy should work in theory and in practice.

Fabulous Freddy / Trendy Wendy
Fred is a news junkie and wants to be in the middle of the action. He lacks the patience to “buy and hold” and thinks of himself as more of a trader than as an investor. After all, if something isn’t working out – why not sell and move on? So, Freddy likes to find sector ETFs that are experiencing the best momentum.

Worried Will / Anxious Ann
Will has had a few major financial setbacks and feels that this is not a good time to take risks with his money. He has a feeling that something is not right with the markets, and is looking for the best rate on guaranteed investments. So, his portfolio is comprised most of CD’s, fixed annuities, and a few gold coins (just in case!)

Can’t We All Just Live Together?
Generally speaking, I’ve found that most people often have several investing personalities mingling and socializing together inside their heads. Each one seems to have their own preferred way of investing. If you bring these personalities back together again, you’ll have the average person’s portfolio.

Which characters do you resonate the most with? Would you want them to manage your money?

So here is the challenge – please assign a total of 10 points, allocating as many (or as few) points as you wish towards each character.

Personality                                            Points                Preferred Investments

Upbeat Alan / Positive Patty                                     Growth-oriented stocks

Dividend Dave / Income Ingrid                                 Dividend stocks, some bonds

Typical Tom / Average Amy                                       Diversified mutual funds

Engineer Arnold / Mathy Martha                              Index funds and ETF’s

Fabulous Freddy / Trendy Wendy                            “Hot” sector funds

Worried Will / Anxious Ann                                     CD’s, annuities, gold, gov’t bonds

Maybe this is a bit like letting the lunatics run the asylum, but it is an interesting look at how many people subconsciously allocate their investments. When it comes to your money, the most important person to keep happy is you!
 
 
Post By: Jim Lee, the Founder of Strategic Foresight Investments and a registered investment advisor. Follow Jim on twitter @jhlinde or at www.stratfi.com.  
 
 
**Information contained herein is for educational purposes only and is not to be considered a recommendation to buy or sell any security or investment advice.