Being that I’m a person who is very interested in the “personal finance sphere”, I often find myself in discussions with people about just that; personal finances.
It occurred to me the other day that there always seem to be a pattern, in how people approach this; Some refuse to discuss it at all, as they consider it “personal” (hence, the word). Others gladly discuss their “personal” finances in public (it should come as no surprise that I fall in that latter category). When talking to people about their “personal finances”, the subject of investing/investments often comes up, naturally.
Just like we tend to often disagree about the best movies, music, vacations, food, sports etc. – the subject of investing/investments also seem to divide us. It then dawned on me that how you approach the subject of “investing”, is a direct reflection of your personality (much like those former leisure activities mentioned before). So, how about we take a look at how your investment strategy is (should be) a direct reflection of your personality?
Firstly, what are the 4 personality types?
Type A and Type B personality hypothesis describes two contrasting personality types. In this hypothesis, personalities that are more competitive, highly organized, ambitious, impatient, highly aware of time management and/or aggressive are labeled Type A, while more relaxed, less ‘neurotic’, ‘frantic’, ‘explainable’, personalities are labeled Type B. – Wikipedia
The first two personality types (A & B) was originally “discovered” in the 1950s by cardiologists Meyer Friedman and Ray Rosenman.
The two cardiologists who developed this theory came to believe that Type A personalities had a greater chance of developing coronary heart disease. Following the results of further studies and considerable controversy about the role of the tobacco industry funding of early research in this area, some reject, either partially or completely, the link between Type A personality and coronary disease. Nevertheless, this research had a significant effect on the development of the health psychology field, in which psychologists look at how an individual’s mental state affects physical health. – Wikipedia
The following is borrowed (this includes the featured image btw) directly from psychologenie.com (I’m the lazy blogger, remember?):
With the advances in the field of psychology and the deeper understanding of the psyche of man, psychologists have come up with type A, B, C, and D personalities. People from every walk of life – based on the behavior and personality traits that they exhibit – can be grouped under one of the types. However, rarely do we find a personality type that solely exhibits the traits of one type of personality. Usually, an individual is classified under a type that he predominantly exhibits traits of, but there are several other traits that he exhibits as well, depending on the situation.
Personality Type A (aka. The Day/Swing Trader):
These individuals are of a highly independent nature. Their ambition to leave their mark in this world singles them out. They are self-driven and know the importance of goal setting, positive thinking, and motivation. If you are interested in studying someone who falls under this type, choose one from the ranks of business leadership. They are competitive by nature and are highly time-conscious. They are looked on as people who are impatient, and could be easily prone to hostility, aggressiveness, and rudeness. They are well-known for their sharpness in getting to the heart of the matter in no-nonsense and blunt terms. Individuals of personality type A are risk takers which characterizes an entrepreneurial spirit. They do have the ability to put on the veil of practicality to solve a problem as and when it is required. The secret of these successful people is that they don’t balk under the requirements and necessity of change which eventually makes them what they want to be.
Other characteristics that sets this personality type apart is the fact that they always need to be doing something – standing in lines, or waiting for the bus is a punishment, all they can think of is how much time they are wasting and how they could have been doing something worthwhile. Speaking of which, they are lost without their day’s activities planned. It’s not surprising for people to refer to them as being workaholics – in fact, they find it difficult to simply relax or even fall asleep quickly at night. They are also prone to cut people off while the other speaks and have been shown to have a low tolerance for incompetence. People who fall under the type A personality types are prone to suffer from hypertension, stress, heart disease, and social isolation.
Personality Type B (aka. The Index/Passive Investor):
Type B personalities are essentially the exact opposite of type A personalities. They are hardly stressed, even in seemingly stressful situations. They are extremely relaxed in any situation and people often describe them as being happy-go-lucky. They are usually cheerful and carefree in most situations and people love hanging out with them because they are usually entertaining and fun to be around. People under this type are characterized by their lack of urgency – they are able to get work done in their own pace, without being driven by deadlines. They love to relax and take things as they come.
Type B personalities are less competitive, and while they give a project their all, they are not stressed about it – constantly worrying about the outcome and success. In fact, they are able to handle failures very well – taking them as obstacles and moving on to other projects.
Another factor that sets them apart is that they are extremely patient and maintain the same patience in the most tense and stressful conditions. They never give in to pressure and aggression, and they never get frantic about anything. They are also very tolerant, flexible, and adaptable in situations, and they hardly ever complain about things.
They lead a full social life, because they like connecting with people and forming strong emotional bonds with them. And being cheerful and entertaining by nature, they make friends easily.
Personality Type C (aka. The Value Investor):
This personality type usually comprises introverts interested in details, which separates them from the rest of the types. They could turn heaven and hell upside down or inside-out to find a fact they are interested in, before taking it to pieces in order to restart the process. They do not take things at face value and are interested in finding out exactly how things work. They think very systematically and analytically and make decisions based on research and information backing them up. Owing to this fact, they tend to be natural problem solvers because they focus on details and are able to notice and register things that other personality types may not as easily. Highly sensitive, they are also known for other character traits like being deep and thoughtful.
These people tend to shirk from social or human interaction. Arranging facts in a logical order is what drives these people. You can find people of type C personified in accountants, computer programmers, etc. These people find it difficult to get out of their shell and communicate with other people, but are extremely competent when it comes to numbers and logic. A reserved nature is the mark of type C personalities, and they are cautious as well. Risk taking is not a very attractive option for these people who tend not to venture into something until they have gone over all the facts with a fine-toothed comb.
Being sticklers of detail and knowledge, and priding in backing every decision with research, they do not do well with criticism. They are also over critical of the people around them.
Personality Type D (aka. The Non-investor – most likely):
These individuals really believe in inertia which they have no shortage of. They prefer to stick to the trodden paths and established routines over the uncertainty of change. These are followers of the spent actions and executors of the direct commands. You will find them doing their best not to stretch their neck out when it comes to taking responsibility and risk. With the help of professionals in the field of personality development and through sheer power of self motivation or self-improvement, these people can overcome their handicap to some extent.
These individuals, which make 21 percent of the population, are afflicted by negativity such as worry, irritability, gloom, etc., and hardly feel self-assured. To avoid rejection, they avoid opening up and sharing their negative emotions. This causes them to suffer from enormous amount of stress which makes them prone to heart-related diseases. The studies show that as many as 18 to 53 percent of cardiac patients have type D personality.
Identifying your personal(ty) (investor) type
I’ll be honest with you, I’ve always had a tough time with these kind of labels, so fret not if you do not identify yourself in ONE of these types. We’re all a mix of A,B,C & D (some more than others, obviously). My point is that you should be aware of your personal traits, and how you react in certain situations, because when you become an investor, these traits will greatly influence your return.
If you’re a clear Type B with a few traits from Type A and a dab of Type D (aren’t we all?), DO NOT ATTEMPT TO BECOME A DAY TRADER! You will end up in a semi-permanent Type D situation if you do! 😉
So, which type are you (a mix of), and what investment strategy are you following? Does it align with the stereotypical personality types listed above?! 😛
Let me know in the comments below!