What is your investing personality? It’s important you know the answer as your personality type can help or hurt you financially.

Perceptions about risk and returns vary and accordingly, investor personalities can be categorised into four broad groups—aggressive, passive, ignorant and procrastinating.

ET Wealth looks at the traits of each personality type to understand how investors behave in the market, how that behaviour impacts their investments and what they can do to enhance their investing experience.

AGGRESSIVE
What are the traits?
The higher the risk, the greater is the adrenalin rush for the aggressive personality. The tendency is to jump in head-first to achieve
whatever goals they have set their eyes upon.

They are the gamblers who are driven by the dream of earning high returns. Not too good at taking advice, they take responsibility for their actions.

How do they invest?
Where other investors see danger, an aggressive investor smells profits. According to Shiv Nandan Negi, Co-founder of robo-advisory firm, MintWalk.com, aggressive investors actively manage their portfolios and take risks beyond their risk-taking capacity.

They invest in high-risk instruments like shares of small-cap companies, penny stocks, sector stocks or funds. They try to time the market to maximise gains.

They over-expose themselves in equities even when the goals are short-term. “These investors are so over-confident about the prospects of their investments that they do not diversify to mitigate the risk. This can hurt their longterm and short-term goals,” says Negi.

He could well be talking of Mumbai-based Ashwini Kalamkar, 49, who has been investing in equity since 1999. Buoyed by India’s growth story, Kalamkar started by investing Rs 3,000 a month in equities.

In 2012, she took voluntary retirement and used her payout to buy shares. Today, Kalamkar’s portfolio of Rs 32 lakh comprises only equity. While Rs 25 lakh is handled by a portfolio management service, Rs 7 lakh worth of investments are handled by Kalamkar herself.

So confident is she of her abilities to pick the right stocks that she has sold off gold worth Rs 4 lakh and mutual fund investments of Rs 3 lakh to buy scrips.

However, her portfolio is not without its share of dead wood. Acting on the advice of brokers, she invested Rs 95,000 in what turned out to be dud stocks. She refuses to get rid of them though, as she feels they will bounce back in the future.

“I know investing all my money in equities is a risk, but if I have to meet all my goals, I have to take high risks,” is Kalamkar’s way of justifying her style of investing.

How can the risks be overcome?
Chitra Iyer, Chief Operating Officer at financial advisory firm, Happynessfactory.in sounds a word of caution: “Such risk-takers can even lose their principal. That can affect all family goals like children’s education, marriage and retirement.”

To minimise risk, such investors need to set realistic and achievable goals. Investing in equity for long-term goals and debt funds for short-term goals is a sensible option. Harsh Gahlaut, Co-founder and CEO of financial advisory firm, FinEdge, says, “Have a good exit strategy in place. Use your aggressive approach in profit booking as well.” Negi suggests keeping a small part of savings aside for ultra-aggressive bets.

ASHWINI KALAMKAR 49, Mumbai

The risk she faces:Her entire portfolio worth Rs 32 lakh is in equity. A serious market downturn can wipe out all her money.

PASSIVE
What are the traits?
Confrontation and conflicts are not for such people. Safety is paramount. They are careful to a fault and rarely take any risks.

How do they invest?
Passive investors consider all options but end up putting their money in debt products like fixed deposits, Provident Fund or traditional life insurance schemes, etc. as they are comfortable with low risks and predictable returns.

As Iyer says, they lack the confidence to take a decision even after understanding the pros and cons of other assets. Often money stays in the bank account or in long-term assets. They don’t bother to review the performance of investments or align these with family goals.

Take for instance Pune-based Gaurav Kawali, 30. He invests only in fixed deposits and avoids equities like the plague. “I can’t afford to lose money given my existing income,” he reasons.

He is referring to his experience in 2014 when he lost Rs 40,000 by investing directly in stocks. At present his savings are 100% in debt—Rs 3.5 lakh in fixed deposits and Rs 2 lakh in his savings account.

How can the risks be overcome?
Passive investors cannot create significant wealth as inflation eats into their returns and the power of compounding does not work for them. Turning to a financial adviser to find ways to align goals with investments can be a start.

Gahlaut says, “While executing investments based on advice, start small but be decisive. Understand benefits of the recommended investment products. These small steps will make the investing journey less risky.”

GAURAVKAWALI30, PUNE

The risk he faces:All his money is in fixed deposits and savings accounts. As the returns are poor, his wealth will not grow substantially.

PROCRASTINATOR
What are the traits?
The lazy ones. They lack the motivation to act on the overload of information they are privy to and lose out on opportunities in the process.

How do they invest?
“Procrastinators possess enough knowledge and money in the bank but they just postpone investing decisions in search of that best price,” says Vijyananda Prabhu, Investment Analyst at Geojit Financial Services. Since they try to time the market or just can’t decide where to invest, they lose out on the power of compounding.

Till 2013, Pune-based Mayur Vyawahare, 28, invested in equities based on his own research. However, in the past four years, he has been unable to make fresh investments.

“I can’t devote time to research. The monthly savings are just idling in my bank account,” he says. By allowing Rs 5 lakh to lie in his account, Vyawahare is denying himself the returns he could have potentially earned had he made the time and effort to invest the money.

How can the risks be overcome?
“A procrastinator needs to take a decision to start somewhere. There will never be a perfect time,” says Gahlaut. For such investors, it’s best to start immediately.

MAYUR VYAWAHARE 28, PUNE

The risk he faces:Has not made any fresh investments in the past four years. As his monthly savings is idling in his bank account, he is losing out on thepotentialhigh returns he could have earned had he invested the money.

IGNORANT
What are the traits?
They are forever waiting for others to tell them what to do because they know next to nothing about the matter on hand and are not willing to put in the effort to educate themselves.

How do they invest?
Ignorant investors fall for convincing lectures by flamboyant so-called advisers. Says Prabhu, “They neither have information about the markets nor the investment products. Their portfolio strength depends on the objectivity and trustworthiness of the adviser.”

Such investors don’t know what is happening to their investments till the losses hit home. As they are followers, they end up following the financial road map of their friends instead of investing as per their own goals.

Mumbai-based Jane D’Souza, 34, always invested on the advice of colleagues and relatives. “I invested blindly in whatever investment they suggested. I didn’t do any research and ended up on the losing side,” she says.

In 2006-7, D’Souza started investing in mid-cap and small-cap stocks on the advice of colleagues. She put in Rs 40,000, but her portfolio value dropped to Rs 11,000 in two years, forcing her to sell. Next she invested in mutual funds, again on the advice of colleagues. The funds underperformed, and D’Souza lost money again, this time around Rs 35,000.

She then invested in a Ulip after listening to an insurance adviser. She paid Rs 80,000 over three years, only to have the investment value fall by half. She exited that plan too. In 2013, on the advice of a relative, D’Souza invested Rs 50,000 in timeshare schemes for three years. On maturity in December 2016, she was supposed to get Rs 70,000.

However, when she went to claim the amount, she realised the company had shut shop and Sebi was looking into the settlement process. “After these setbacks, I have begun investing only in fixed deposits and traditional insurance plans to save taxes,” she says.

How can the risks be overcome?
The ignorant investor needs to become financially literate. They should take the help of a financial planner to guide them in achieving their goals and follow the plan diligently.

Such investors should not act on market tips and advice from friends and colleagues to make a quick buck. They have to understand their financial goals and requirements, and act accordingly.

JANED’SOUZA, 34, MUMBAI

The risk she faces:Has blindly followed investment advice of friends and colleagues in the past and lost money repeatedly. Now only trusts fixed deposits, which will not giveinflation beatingreturns.

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Invest-Wealth-The Economic Times