What Kind of Investor Are You?

I found today's author Mr. Moneybags' through his blog BigFatMoneybags.com a little while back. His view on finance isn't necessarily the norm and I thought it was great. Moneybags take on finance adds a bit of humor in an atmosphere that can too often become stressful. Without further delay I present, Mr. Moneybags.


What kind of investor are you? It’s a simple question really. Although, it is surprising how few people can answer that question due to their lack of investment strategy – these are the same people than end up collecting empty cans off of the sidewalk for spare change. Let’s take a look at the four prominent types of investors:

  1. Buy-And-Hold (a.k.a. Comatose) Investor: Common traits include making a small amount of trades every year while perusing various wine tasting ceremonies and taking tours of box factories to make up the time in between trades.
  2. More Active (or slightly less comatose) Investor: If you find yourself making a few trades every quarter while waxing your Volkswagen, you probably fit into this category.
  3. Active Investor (a.k.a. Trader): Common traits include making multiple trades every week and driving mid-priced convertible sports cars which show off their bald spots as it gleams in the sunlight.
  4. Day Trader: Rarely holding investments for longer than a day, making multiple trades everyday and tending to scream hysterically from the rush of making trades mixed with the effects of a concoction of illegal substances.

Which type of investor is the best?

It entirely depends on the kind of person you are and your investment strategy. If you have a series of heart attacks every time the DOW dips a few points or your holdings drop in price by a few pennies, you might not want to take up day trading. On the other hand, if you would rather jump out of a plane while on fire instead of going months between making trades, a long-term investment strategy wouldn’t be the right fit for you.

It’s one thing to want to be a day trader and another thing to actually successfully do it. You have to be completely honest with yourself and your abilities.

If you are new to the world of trading and investing, you are going to want to start at the top of that list as a Buy-And-Hold Investor and slowly move your way down to Day Trader. Typically, the more trades you make the more likely you are to screw up, that’s why I suggest to take things one step at a time.

Also, the more experience you rack up means the less you allow your emotions to play you like a piñata. You see, when you start investing you have no idea what you are doing - and it shows. New investors are the ones that start to panic at even whiffs of market turbulence, many end up harvesting their kidneys as a hedge against losses [Disclaimer: slight over-exaggeration].

As you gain experience, you learn how to take advantage of any moves in the market and your knowledge works as a safety blanket which you can always rely on, just like that one time you relied on your parents to bail you out of jail for smuggling a crate full of cheap vodka across the border. You will be more efficient at researching your investments and will be able to distinguish between vital information and useless information.

Multiple Investing Personality Disorder

Don’t forget that you can also utilize multiple investment strategies in one time, to get the best of all worlds - no one ever said that you can’t be a Day Trader AND a Buy-And-Hold Investor.

There is nothing stopping you from dipping your toe into various investment strategies to see which one suits you best, and there’s no better or more efficient way than by utilizing a few at once. Of course the problem is whether or not you have the necessary funds to get you to divvy up your portfolio into investable sums which is why a lot of people tend to avoid this route.

Another benefit of Multiple Investing Personality Disorder (term copyrighted by me), is the fact that it can serve as a tool for diversification. By diversifying your investment strategies you are mitigating the pitfalls that come with each investing system, of course you are also diluting the benefits as well, but for most people the added safety is worth it.

In the end

Remember, even experienced investors can end up working as greeters at Wal-Mart. Why?

Because they never developed sound investment strategies; instead of acting like Investors they were acting like Speculators. This is the crucial difference between the types of people that make money and lose money in the markets. You can find out more about these two personality types in this article.

You’ve probably heard the saying, “There is no such thing as stupid ideas, only stupid people.” Well, the exact same thing applies to investors: there is no such thing as a bad investment, there are only bad investors. Your investment strategy has to be built around you and not the other way around, otherwise it will be the equivalent of an unstoppable force meeting an immovable object: not much will happen.


Mr. Moneybags



Mr. Moneybags and his blog (www.BigFatMoneybags.com) are determined to prove to the world that the subject of money shouldn’t make you want to douse yourself in gasoline and run into a forest fire.

*The content posted above was written by a third party. The comments, claims, or opinions expressed therein are not necessarily those of INO or MarketClub and we are not responsible for the information provided in the post or on the author’s site.

5 thoughts on “What Kind of Investor Are You?

  1. Hans: You are absolutely correct, the average investor of any kind holds losses (not only limited to buy and hold) - mainly because they do not have a decent investment strategy. Clearly that is not the case with you!

    1)Warren Buffett makes only a few trades every quarter versus hundreds for the average day trader. Speaking in relative terms, I would say comatose is the perfect word to use in such a situation. I have the utmost respect for long-term investors (I am one myself) and you are absolutley correct, the hard work is in the research - which voids your second argument (I'll explain why shortly).

    You also have to remember that this site predominantly consists of traders typically with short-term holding periods so, as any good host would do, I would cater my content to suit the audience as much as possible without completely deviating from what makes me me.

    2) If you were to read the article linked to in the second-last paragraph of this post you would clearly see that our definition for investor versus speculator is completely different. For the purposes of this article I used the Graham-ian definitions, where a speculator is someone that does not research his/her investments diligently and merely follows the crowd because it just "feels right" whereas an investor is more-or-less the opposite.

    Had I used the real-world understanding of investing versus speculating for the purposes of this article then I would be in complete agreement with you and would have deserved a swift kick in the crotch for writing what I had.

    For future reference, please don't scrutinize someone's work without carefully reading their material.

  2. Well, this article is not great for a few reasons...

    1) Buy and hold = "Comatose" investors? Warren Buffett must be the most comatose investor of all time based on your assumption, yet he is the 2nd richest person in the world - sometimes sitting on your hands is better than trying to act inappropriately and "comatose" is not a suitable word for long term investors... the hard work is in the initial research

    2) You seem to blur the line between investing and speculating... Investing is typically longer term and I believe is mostly for regular income/ cashflow (including selling options) and based on fundamental factors. Trading by nature IS speculating... you are using probability to "guess" the likely direction of a market and profit from a capital gain or loss...

    "Acting like speculators" tied to losing money...??! this statement is false, I know professional private traders making 70-90% per year with 84% win/loss ratios that "act like speculators" using short term 1-3 day trading
    "Acting like a speculator" has nothing whatsoever to do with making or losing money in the markets... only you and application of your money management/ strategy does...

  3. The average buy and hold investor still holds losses. The question depends also on the respective liquidity of the markets. If everyone runs for the exit liquidity runs dry. I use a buy and hold strategy using stop loss and i take care to align the stop loss every week.
    I am also a minute to hours trader of high leveraged options. The broker must support trailing stops and OCO orders. I get out immediately if a bet runs against me and I get out too with 5% to 10% profit.
    There is just one exception if there are rumors a central bank is tightening or about to rise rates. That makes a sure 100% profit.
    But in general if I make 5% to 10% in 15 minutes I do not wait another 20 minutes for the next 10% rather I sell and screen for the next trading opportunity.

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