Matching Your investment Strategy with Your Personality
Quote of the Week: “Investing money is the process of committing resources in a strategic way to accomplish a specific objective.”~ Alan Gotthardt, Author - The Eternity Portfolio
Money represents different things to different people. For some, it could mean financial independence, for others, it could be security or the means to enjoy a desired standard of living.
All of us work hard to ensure that we have enough money at the end of the day. We invest this money in a variety of investments so that it can make more money. However, do we save and invest in the right manner? Is there a plan of action that guides our investments?
Investing requires a methodical and disciplined approach. You need an investing road map so that you reach your financial goals. This requires you to look at the big picture.
If you have ever waded into the sea of investment opportunities, you most likely have discovered that there are as many different investment strategies. So how do you choose a strategy that is right for you? To choose an investment strategy, you first need to understand your own personal characteristics and financial characteristics. The following are some of the self assessment tests you should undertake:
Patience: Some investment strategies require a lot of patience, which is not a common virtue amongst many investors. If your goals are short term by nature, you should consider adopting a passive investment strategy that provides stable and regular income like the Zimele Money Market Fund.
Risk Aversion: If you are risk averse, adopting a strategy that entails risk will not be a strategy that works for you in the long term. All investments involve some degree of risk however; some investors would rather sacrifice the high returns associated with high risk investments for guaranteed returns associated with low risk investments.
Individual or group investor: Some investment strategies require you to go along with the crowd and some against it. The one better suited for you may well depend on whether you are more comfortable going along with the conventional wisdom or whether you are a lone investor.
Time you are willing to spend on investing: Some investment strategies are much more time and resource intensive than others. Generally, short term strategies that are based upon pricing patterns or on trading information are more time sensitive than long term buy and hold strategies.
Age: As you age, you may find that your willingness to take risk decreases. The rule of thumb is to subtract your age from 100 and put the resulting percentage into risky investments and the rest into less risky and guaranteed returns investments. However, if a little extra risk will not give you sleepless nights, then a conservative strategy may not work for you. Nonetheless, it is prudent to shift your investments from the risky investments to conservative ones as you age so as to preserve capital.
Choosing an investment strategy is at the heart of successful investing. To make the choice though, you need to look within before you look outside. The best strategy for you is one that matches both your personality and your needs.
You can send your comments or questions to
, or visit our offices at Ecobank towers, 7th floor, Muindi Mbingu Street for more information on personal financial planning. You can also follow us on our facebook page- Zimele Asset Management (Kenya)