2016’s New Investor Tribes: Which of these dominant investor types are you?
- Global broker easyMarkets defines the new investor tribes
- Wealth preservers, guided investors, free thinkers and aggressors dominate the market
- Tribal characteristics shaping investment preferences for 2016
Back in 2012, author Michael Pompian identified four categories of client when it comes to behavioural finance: the preserver, the follower, the independent and the accumulator. Now, global broker easyMarkets has taken the concept a step further and examined how these dominant investor types can be grouped into four investor tribes.
Hanaa El Moudden, Senior Market Analyst at leading online trading services provider easyMarkets, explains,
“Understanding the various investor types can help new and experienced investors identify and join their respective tribe and enjoy greater success. It’s about knowing your characteristics as an investor and understanding how those will shape your investments in 2016.”
2016’s New Investor Tribes:
- The wealth preservers
Goals: Financial security and wealth preservation
Behavioural orientation: Risk-averse, passive
The wealth preserver tribe has two clear goals when investing: maintain financial security and preserve wealth. Wealth preservers are the most risk averse investors. They are perfectly content avoiding high-risk investments and the high rewards they promise. For these investors, losses are rarely justified and losing gains is even less acceptable. Contrary to popular belief, the preserver tribe isn’t just concerned about the future. Rather, they’re extremely enamored with the short-term. They are meticulous and obsessive over short-term performance and seek to preserve every penny earned in the market.
Investments they are likely to be watching in 2016: gold and silver
- The guided investors
Goals: Managed investment portfolio
Behavioural orientation: Passive, lacks interest in markets, disengaged from investment decisions
Guided investors invest out of necessity, despite not having a strong interest in the financial markets. This tribe generally refers to people who seek to build wealth passively through a managed portfolio or instructions from a financial professional. Guided investors generally don’t have their own ideas about the market and have no trouble admitting it. They simply recognize that investing should be part of their life in some way and seek out professional resources to help them achieve their investment decisions.
Investments they are likely to be watching in 2016: options
- The free thinkers
Goals: Create wealth through independent analysis and active investments
Behavioural orientation: Active, analytical, risk taker
The free thinker tribe loves the financial markets and spends a great deal of time researching securities. Free thinkers are usually among the first to open up an online trading account and are less likely to delegate trading tasks to fund managers. Independents are what Benjamin Graham describes as active investors or individuals who buy and sell their own securities and continuously monitor their investment strategy. Free thinkers make a lot of time available to investing and are less likely to adjust their strategy because of changing investor sentiment. However, they need to avoid becoming too contrarian in their views, as this could cost them in the long run.
Investments they are likely to be watching in 2016: USD/CAD and DAX and dow30
- The aggressors
Goals: Create wealth through aggressive investment strategy
Behavioural orientation: Aggressive risk taker, very confident, engaged in decision making
The aggressor tribe takes a highly active approach to investing. They embrace of a high level of risk and lack willingness to stick to a long-term investment plan. The aggressor is highly emotional and extremely confident in their abilities, making them more likely to adjust their portfolios and holdings in response to changing market conditions. Aggressors are active researchers who tend to dig a little bit deeper to find information than the other investor tribes. Unlike guided investors, aggressors are unquestionably the only ones steering their ship.
Investments they are likely to be watching in 2016: Energy commodities
Identifying your tribe
Your approach to the financial markets, risk appetite, investment interest and availability all play a role in dictating your investor tribe. The good news is all investor tribes may generate wealth in the financial markets. By understanding your behavioural orientation and level of interest in investing, you can start to piece together the best investment strategy for you.
If you’re just getting started in finance, you should learn as much as you can about the market and the risks and rewards associated with investing. By reviewing the different markets and opportunities involved, you can begin to embrace the tribe that best represents your interests.
For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.
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