In keeping with our series on planning your investment portfolio, I wanted to take a moment to explain the three main types of typical investors so you can determine where you fit best.

3 Quick Tips on How to Start Investing

In our last episode, I gave you three quick tips on where to start your journey to becoming a Winning Investor.

To recap:

First: assess where you are in your financial life and what goals you would like to achieve.

Second: once you understand where you are and where you want to go, determine your risk tolerance.

Third: decide when you will set aside time each week–or each day–to read news, financial information, and keep up with your investments.

How to Figure Out What Kind of Investor You Should Be

I wanted to build on that third point in this episode and help you determine more about that third point–the time it takes to manage your portfolio.

In my books The Disciplined Investor and The Winning Investor’s Guide to Making Money in Any Market, I described three basic types of investors.  In order to figure out which type of investor you should be, you must also assess how much time you will commit and how much assistance you will require in getting started on your journey and continuing along the way. 

Should You Be a Do-It-Yourselfer?

Let’s start with the first group–the do-it-yourselfer  If you’re reading this article, chances are you fall into this group!  You’re among good company!

The do-it-yourselfers want total control of their investment portfolio and are willing to put in the hours it takes each week to stay on top of major financial information, particularly as it relates to those few companies they have added to your growing portfolio.

Do-it-yourselfers need good, quality information and it benefits them to have a passion for the markets.  Not everyone has this; there are plenty of people who think finance is either boring or just too complicated. That’s why there are two other main types of investors.

Should You Be a Collaborator?

I like to call the second group collaborators because they want some sense of control over their portfolios and want to make their own decisions as they keep up with financial information, but they realize that they need a little help– either at the beginning of their journey or from professionals when trying to build a well-diversified portfolio.

As we discussed in a prior episode, collaborators seek the advice of financial professionals, just like people seek legal advice from lawyers instead of running off to the library and reading dozens of books on case law when all they want is an answer to a single question or resolution of one issue. 

Collaborators can seek advice on something as simple as deciding between two stocks or as complex as getting the whole portfolio put together, but in the end, they want to be the one to make the final decision and want to be responsible for the outcome.

Should You Be an Outsourcer?

That leaves us with our third group–people who want an investment portfolio but either want no part at all or just want a very limited role in creating and managing it.  I call these the outsourcers and that’s not a negative term at all.  It’s a very wise decision to make if you determine that you do not have the time, energy, or passion to gain the knowledge that it takes to stay on top of the financial markets while managing a diversified portfolio. 

These investors  want to turn over the control of their portfolio to  qualified, reputable, experienced financial advisers or money managers. 

You Don’t Have to Be the Same Type of Investor Forever

And of course it goes without saying that even once you determine what type of investor you are, and how much control you desire over your portfolio, that you can switch groups at any time. 

A young investor may decide to surrender full control of his portfolio while in his 30s as he focuses on work and family, but then decide to take a more hands-on, do-it-yourself approach after retirement.

A middle-aged investor who loves the markets might initially seek out advice as a collaborator and then take that advice to heart and manage his portfolio all by himself from then on.  Of course, should the work get too hard or time consuming, or should the portfolio suffer, he can always choose to turn back over the reins to a financial professional.

Take the time to decide what approach is best for you and then get to work!  Don’t procrastinate on building your portfolio because it seems hard.  Every journey that’s ever been completed began with a single step, so get started today on your journey to becoming the winning investor you want to be!

 And of course consider picking up a copy of my latest book The Winning Investor’s Guide to Making Money in Any Market is available at Amazon and other fine booksellers and in print and digital versions too!

Want to become a Winning Investor? Then be sure to get your copy today – The Winning Investor’s Guide to Making Money in Any Market.

Source:   The Disciplined Investor - A. Horowitz – Pg. 223.  

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