Investing Personalities

According to the Center for Retirement Research, personality significantly impacts if, when, and how a person interacts with the stock market. This is determined by risk tolerance, timelines, financial goals, and personal or emotional factors. Understanding your personality and perspective helps you make more informed, confident decisions that fit your financial goals and comfort levels.

There are four prominent personality types found among investors:

• The Methodical Investor: More conservative and strategic, Methodical Investors rely on observable facts, in-depth analysis, and research to guide their investment decisions. They avoid allowing emotional factors to impact their investment strategy and prefer to follow an established process.
• The Cautious Investor: Cautious investors are more skeptical and risk-averse, preferring to prioritize wealth maintenance and preservation over growth. This type of investor usually accrues wealth through a high income or inheritance, meaning they have less experience with high-risk, high-reward investments. They are more likely to work with a wealth manager or a fiduciary and prioritize investing in low-risk bonds and index funds.
• The Individualist Investor: Often self-taught and independent in their investment behavior, the Individualist Investor blazes their own trail. Less risk-averse and more confident in their research abilities, they are often self-made in their wealth and prefer more direct control over their investments.
• The Spontaneous Investor: Spontaneous Investors are less methodical and strategic, driven more by emotional factors and market changes. They are more willing to take risks, their investment strategies are ever-changing, and their portfolios tend to have higher turnover, though they are at higher risk of financial loss.

For women, the investing landscape is unique, shaped by factors men may not experience in the same way. Societal expectations and the financial education gap have led to a lower investment rate among women. However, according to Forbes, while women generally invest less than men, when they do, they often outperform their male counterparts. Despite this, misconceptions about women and investing persist. For example, it is assumed that women are risk-averse and largely fall into the category of the Cautious Investor. However, NASDAQ reports that, as more cautious investors, women are more likely to do thorough research, taking calculated risks and leading to consistent, long-term success.

Some factors have a more profound influence on women’s investment choices, such as career interruptions like maternity leave, longer life expectancy, and a stronger focus on future-state finances like retirement and healthcare savings. Family also plays a significant role in our investment decisions. For many women, investing isn’t just about individual wealth but ensuring long-term family security. Whether saving for a child’s education, planning for healthcare expenses, or securing retirement, family considerations often guide financial decisions. These factors have led women to be more conservative and careful, traits often found in Methodical or Cautious Investors.

Studies have shown that women face many unique challenges in the finance and investing space, particularly when it comes to access to financial education. The University of Southern California explains that although the knowledge gap between men and women is quite significant, there’s evidence that women are increasingly interested in access to more financial education options. Rossitsa Getskova, Vice President and Portfolio Manager at United Wealth Management, stresses the importance of striving for financial knowledge and independence. “Building the foundation of financial independence early on in life will give women the tools to succeed and build confidence, avoiding the daunting financial burden that comes with being unprepared,” she says. Familiarizing yourself with the basics of investing can go a long way toward demystifying the process.

It’s also important to start small and build experience over time. The more you engage with your investments, the more comfortable you’ll become. Consider listening to podcasts, reading books on finance, or attending seminars focused on women’s finances. Surrounding yourself with a supportive community can help you gain knowledge and keep you motivated to stay on track and reach your goals.

Women can thrive as investors by creating strategies that are aligned with their investment personalities and tailored to their needs. The first step is setting clear and achievable financial goals. Whether buying a home, funding a child’s education, or preparing for retirement, having specific goals will guide your investment choices.

Once your goals are defined, it’s essential to begin building a diverse investment portfolio. By spreading investments across various asset types – such as stocks, bonds, or real estate – you can reduce risk while still taking advantage of growth opportunities. If you need help building this portfolio, consider seeking professional advice. Our Financial Advisors at United Brokerage Services, Inc. can work with you to create an investment strategy that aligns with your goals and investment personality.

Recognizing your investment personality is another essential step to creating a tailored investment strategy that is right for you. Are you cautious, preferring lower-risk investments like bonds and savings accounts? Or do you lean toward a more aggressive approach, eager to explore stocks, real estate, or higher-yield options? Maybe you fall somewhere in between. Reflecting on your values, financial goals, and family responsibilities will help you find the answer and create an investment strategy that’s right for you, your goals, and the future you want for yourself and your family.

What kind of investor are you? Take our quiz to discover your investing personality and how to use it to your advantage for long-term financial success.

Take our quiz to discover your investing personality and how to use it to your advantage for long-term financial success.