Understanding the way you react in situations of uncertainty can provide a lot of insight into how you deal with money, especially in today's shaky economy.
There are four basic investing personalities, according to a new study from financial services firm TransAmerica. During times of crisis, people tend to fall back on their basic instincts, and each of these different personality types reacts differently to change.
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The idea here is that you want to be aware of what those instincts are so that you are able to make more educated decisions with your money. While the TransAmerica study was conducted on Americans over the age of 50, the results can be a basis for understanding the investment styles of Americans of almost any age.
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Venturers are at their best when things are changing, because they are self-confident about their financial decisions. Because venturers thrive on change, they tend to make riskier investments. Venturers, however, need to be aware of their own limitations and should ask for help in situations that might be over their head.
While venturers enjoy change, pursuers crave it. They are quick decision-makers and will try most anything at least once. However, because pursuers tend to be fast-thinkers with short attention spans, they are constantly looking for the next best thing and have trouble sticking with their decisions and tracking their investments over the long term. Pursuers are the type of investor who would be most likely to buy high and sell low.
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Finances make anchored investors very anxious. Anchored investors want things to stay the same and are unhappy when things change, so most don't feel comfortable putting their money into any risky investments. Anchored investors should consider working with a financial adviser or sharing investing duties and ideas with a spouse so they feel more secure making decisions with their money. They may be missing out on good investment opportunities.
Adapter: "Take it as it comes"
Adapters are the most flexible of the bunch. They don't crave change, but once they make the decision to change, they follow through with it. They typically think before they act, and their actions reflect their current situation. The adapter is the most realistic type of investor and tends to excel when the market gets shaky.
You may not find you are completely one type of investor but that you have a few qualities of each. Simply reflecting on how money makes you feel--excited or anxious--is a first step in better understanding yourself. Once you understand the type of investor personality you have, you will find yourself more in control of your investments and your emotions.
Right now, our economy is going through many changes. You should feel comfortable with those changes so you make decisions that are best for you.
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