Know the Different Types of Investors Before You Put Your Money to Work

There are a few primary types of investors out there.

And if you want to get into the game, you should determine which one you are. We've taken a look at the major types of investors to bring you the differences. After comparing our info to your own desires and aptitude for risk, we think you'll have the right tools.

With the confidence that comes with knowing your comfort zone, it will be easier for you to make smart decisions. And you don't have to be trading millions to make this guide work for you. If you want to make the market work for you on any level, you can probably benefit.

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There are many differences between the assorted types of investors.

Not all types of investors are created equal. Sure, you'll find plenty in the market who cling to any of the descriptions below. But their track records, on average, will show some methods are better than others. And when you look at the pros, they tend to avoid more volatile investment plans. However, the ultimate choice has to be yours. If you identify with any of these types of investors, give them a shot. And then you can let your own results be your guide. Even still, one similarity is a desire to make money. And the simple truth is some methods have a better track record. We'll give you an overview of each and let you decide which sounds like a better option.

1. The Leader

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If you want to be ahead of the trend, you are probably an active investor. Among the different types of investors, this one is out in front. That means you would spend a lot of time studying the market. You'll try to assess ups and downs before they occur.

Sometimes, this means you'll win big. Buying before a big spike or selling before a big drop can be huge. And if you're doing it legally, it requires plenty of insight. On the other hand, you could just be plain wrong. Being a good leader always means taking risks. If you're successful, you'll probably build influence among investors. But if you're not, you're likely to peter out quick and give up on the markets.

2. The Follower

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For every leader, there's a follower. The types of investors in this category try to piggyback off of other investors' successes. Of course, this means they often miss the big gains they hope to duplicate. By the time a follower realizes that someone else made money, the window is probably closed.

So we really don't recommend this method for most investors. While other methods have an element of risk, there is hardly any other outcome for a follower. There are some perennial favorites that followers have picked up and continued to make money. But chances are, any of the types of investors already bought that stock, too.

3. The Hands-Off Approach

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As technologies and algorithms become more advanced, this approach is gaining popularity. Automatic investments can be a very easy alternative if others seem too labor intensive.

We think there is potential upside. Having money go into your portfolio with every paycheck, for instance, can be smart. You never forget to invest. And you can set you level of risk up front, so you're comfortable there. The primary risk is becoming numb to the market, though. If you identify with these types of investors, make sure to keep an eye on your investments. And play attention to any fees and other expenses to make sure you're getting your money's worth.

4. The Hands-On Approach

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On the other side of the spectrum from the hands off approach is this method. Think of this group as a hyperactive leader. If the types of investors you identify with embrace this philosophy, you'll never rest.

Always trying to make your portfolio perfect, you will almost constantly be fretting about investments. While it is good to remain active, you should also let the market do its thing. We recommend long term investments. Remaining too involved in your own investments means you could lose out in the long run.

5. The Clearance Bin Shopper

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Everybody wants to feel they're getting a steal. We see stories of folks who find priceless artifacts at yard sales and feel the same can happen to us. But some people try to base an entire market strategy on this approach.

And there can be some profit to be made by buying stock at its bottom. Of course, there is also the risk that your cheap stock is on its way to being completely worthless. We think that padding a portfolio with inexpensive shares isn't a terrible thing. But whenever you speculate on a clearance buy, do your research. There's always a reason a stock is trading for a fraction of its former price. Make sure you're comfortable betting it's poised for a comeback.

6. The No-Stock Method

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Not all types of investors are interested in Wall Street. There are many other ways folks have found to put their money to work. Property is a popular option, as it will never lose all of its value. 

There are also precious metals, which some investors favor against a potential economic crisis. But we think stocks should be a significant part of most investors' portfolios. It's up to you how much you want to diversify. And if you're interested in land management or development, such investments can and do pay off.

7. The Die-Hard Fan

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Maybe it's the company your grandfather and father worked for before you. Possibly you just love the product or service it provides. But there are reasons some types of investors are loyal to a fault.

And let's be honest, there really is a risk here. Putting too many of your eggs in any basket is probably a mistake. We've seen entire industries upended in recent years and nobody has a crystal ball. Even if it is your own employer and even with an incentive, we think advise against being too invested. If you find a dime of every invested dollar goes to one company, it might be time to re-evaluate. 

8. The Social Activist

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Some types of investors can't measure success in dollars. If you feel it is necessary to make a statement with the stocks you support, that's a valid choice. But with it comes the realization that return on investment could be lower than other methods.

The many types of investors exist for a reason.

Everybody has their own comfort level. While there are many different investment strategies, you certainly don't have to follow one method exactly. 

We hope we helped you find what type of investor you are. If so, share this article with the investors in your life. Leave us a message below with any thoughts or questions.

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