What are the 4 types of investors?

4 Types of Investors

No matter their investment style and risk tolerance all investors have different investment styles and risk tolerance.

Investors want a return on their money; your job is to demonstrate that your company can do that. To do this, a comprehensive business plan will prove vital.

1. Preserver

Preservers put great effort and emphasis into maintaining their wealth and taking losses very seriously. They may become preoccupied with short-term investment performance and may be difficult to advise due to resistance to change.

Relying too heavily on advice from friends or family, investing trends, or their gut can quickly derail long-term goals. They may resist following a financial plan and experience cognitive biases like conservatism, availability, and confirmation biases, making financial planning even more challenging to implement successfully.

Preservers like to be actively involved in decision-making processes and can overtrade, often due to cognitive biases like loss aversion, status quo bias, and endowment biases. Furthermore, these investors can be vulnerable to hindsight bias and disposition effect bias which could cause them to hang onto losing investments too long and sell winning ones too early – ultimately decreasing tax-efficient returns and their potential return. They tend to require high levels of security, which limits potential return. Preservers would benefit significantly from an automated trading strategy that reduces risks and maximizes returns while automating trades.

2. Follower

Investors use various financial instruments to generate returns and meet goals such as saving for retirement, funding education, or simply increasing wealth accumulation. Common examples include stocks, mutual funds, exchange-traded funds (ETFs), gold, silver real estate, or other commodities investments that help achieve these objectives.

Follower investors tend to rely on advice from friends, colleagues, and financial publications in making investment decisions, often responding emotionally when an idea is presented and making emotional decisions. Furthermore, follower investors often overestimate their risk tolerance, leading them to take unnecessary risks.

Independent investors tend to be active market participants and possess their approach to investing. Their unconventional views may appear counter-intuitive; however, independents work well with advisors while conducting their research and aren’t afraid to question an investment recommendation when necessary.

3. Independent

Investors invest their capital to earn returns to help meet financial goals like saving for retirement, funding their child’s college education, or simply increasing wealth. Investors may invest their capital in stocks, bonds, real estate investments, mutual funds, exchange-traded funds, currencies, commodities, or businesses to achieve these objectives.

Research-driven decision-makers choose carefully and are open to discussing them with advisors. Independent thinkers frequently search out new information and analysis before making investment decisions quickly – yet can still fall prey to biases that can sabotage financial success.

Independent investors typically favor companies with clear business plans they can understand that demonstrate potential for profit and low-risk investments that promise conservative gains – certificates of deposits or certain bond products may appeal to these investors.

4. Accumulator

Accumulators invest in amassing wealth. They tend to have high-risk tolerance and trust their ability to grow their fortune, yet they can feel anxious if their investments take a turn for the worse. Loss may rattle their confidence in the investment process and even cause discomfort when funds go astray.

Investors commit their capital across various assets, from stocks and bonds to mutual funds, exchange-traded funds (ETFs), real estate, and commodities. Each type of investment offers different risk/return characteristics and necessitates different forms of analysis to comprehend fully.

Attracting investors requires finding them where they already are. Personal investors such as friends and family tend to be among the first investors for any new business venture; however, their funds may be limited as they often invest only specific amounts or require extensive documentation processes before investing. Furthermore, they may not necessarily want a long-term relationship with your company, making building strong bonds difficult.