Advisory FAQ: What Type of Investor Are You?

Dan Westin, CFP®, and CEO of QA shares his thoughts on what variables are important to consider when developing your investment plans.

 

Dan, what are the key variables when someone is contemplating how to develop and manage their investment plan?

Dan:

Well, there are a few, but a couple of the most important are: time and expertise. First, it takes time to ensure you’re putting the money to work in a prudent way. Trying to determine how to best invest your hard-earned money requires thinking through your risk profile (comfort level), clarifying your objectives, knowing your time horizon, and assessing your risk capacity. This assessment itself requires an investment of time.

Second, it takes expertise.  Investing can be overwhelming to some even if they have the time.  Most investors have a variety of financial resources to consider, including employee benefits, personal savings, inheritance, etc.  And there are thousands of investment options available and different risk levels and market exposures, domestically and internationally.

Ultimately, sound investment principles and planning should inform your portfolio construction and security selection. This involves time (for initial set up as well as ongoing reviews) and some level of expertise.

 

Does thinking about what type of investor you are, or want to be, change your approach?

Dan:

Yes.  Investors should evaluate whether they have the time, interest, and expertise to invest thoughtfully. One way to help decide is to identify their investor type. We find it helpful to bucket investor profiles into three main categories, including DIY, Hybrid or Delegator.

 

What is the profile of a DIY investor?

  • Generally, share an interest or proficiency with investing on a self-directed basis
  • Willing to take the time and effort required to implement an investment strategy
  • Often seeking to minimize investment expenses
  • Lower degree of complexity in their financial situation
  • Often in the accumulation phase of investing

 

What is a Hybrid investor?

  • Advisor guided – combination of investment advisor support and self-directed investing
  • Prefer an active role in their portfolio, without full responsibility for investment decisions
  • Split investments between managed assets with an advisor while maintaining self-directed investing for a portion of their wealth
  • Balance personal investment interests with the responsibility of pursuing financial goals

 

What type of investor is a Delegator?

  • Dedicated planning and investing with an advisor
  • Generally stretched for time and capacity to manage personal investment decisions
  • Prefers to delegate to professional management and highly values objective advice and counsel
  • Recognize that the complexity of their personal financial decisions will increase with time and wealth

 

Any closing thoughts?

Dan:

There are lots of ways to approach investing and each person has unique needs and preferences.  The keys are to ensure that someone is taking the time and has the expertise to consider all the variables – whether you’re doing it on your own, or with the support of an advisor.

 

Meet with your advisor or contact us today to talk further about your important investment planning.

 

 

 

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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