Much is learned from a detailed review of investment personalities.

My View:

Investment personalities teach us a great deal about investing comfort.


Adopt the most suitable investment personality to reach your goals.

“If you chase two rabbits, you will not catch either one.”
— Russian proverb

There is one pillar of the nest egg you want to get right. It makes such a difference!

Each of us has a distinct investment personality. Think of it as personalized investing DNA. Hopefully, it resembles our comfortable tolerance for risks. Especially, when market jitters make sudden appearances. In my experience, the investment personality changes infrequently. Perhaps, once every 10 to 20 years.

One significant guideline that I use in designing the client portfolio is the investment personality. I suggest visiting the internet provides details on the composition of the various investment personalities. Each forms the foundation and structure for a particular investing approach. Magnitude of returns depends on the decisions made. Therefore, the top aim is getting to know about yourself, vis-à-vis the risk tolerances and preferences that make sense. You want to feel comfortable with your choices over the long run.

Each of us has a distinct investment personality.”

Begin by understanding the elements of those personalities, also known as investor profiles. My caution is that some personality labels may cause name confusion, so tread carefully. I summarize a popular handful found on the web.

1. Capital preservation
This investing approach is suitable mainly for risk-averse investors. They have little tolerance for volatility and unpredictability of return. They typically invest in guaranteed vehicles having predictable income, stability and very little fluctuation of capital value. Investors using this model are content to achieve low returns in exchange for high liquidity and reduced risk of loss. They often draw regular portfolio income. The primary focus is capital preservation.

2. Income driven
These investors are somewhat risk-averse. They aspire to attain modest portfolio appreciation along with minimal potential for loss of capital. This personality is willing to incur some volatility, keeping in mind its aversion to incurring losses. The majority of investments are of the fixed income variety. Such portfolios include modest allocations to stocks for predictable growth. Arranging a dependable income stream is the main focus.

3. Balanced income/growth
These investors accept tradeoffs between long term growth and capital preservation. Their emphasis is to achieve balance between stability and appreciation. This approach is comfortable with moderate volatility and risk of loss. Portfolios include balanced allocations to stocks and bonds. Overall, these investors are comfortable pursuing a balanced approach between reasonable growth and steady return. They are willing to incur a moderate level of risk. Balance delivers long run comfort for this personality.

4. Growth/business risk
These investors are prepared to take greater risks. They are patient and willing to tolerate more bumpiness in investment returns and fluctuations in capital value. Their primary interest is growth, with capital preservation as a secondary consideration. These investors are comfortable with the portfolio skewed primarily in favour of stocks.

5. Aggressive growth
These investors seek to achieve significant long-term growth. They are willing to tolerate greater fluctuations in capital value over longer periods of time. Superior long term investment results are sought after as investors accept far greater swings in returns and substantial risks. Typical portfolios have high exposure to stocks during both bullish and bearish markets. These investors are comfortable in making quicker decisions.

Typical allocation to stocks

One differentiation among the personalities is the component allocated to stocks. My table represents typical allocations.

Investment personality Typical allocation to stocks
Capital preservation 20%
Income driven 40%
Balanced income/growth 50%
Business growth 60%
Aggressive growth 80%

Characteristics of the client investment personality is essential information. I structure a portfolio that reflects stated goals and desires only after considering client comfort with the chosen personality. I also find that spouses may each have a different investment personality that has to be blended into part of the mix.

Priorities often change as we progress through our life stages. Someone starting out may be an aggressive investor. Conversely, someone approaching, or in the midst of retirement, is likely to be more concerned with preservation of the nest egg.

Most investors can tolerate 40% to 60% in stocks and the rest in bonds. Few can tolerate comfort near 100% of the nest egg invested in stocks. That necessitates adoption of the speculative profile.

Investors may not have thought of themselves as having distinct investment personalities. If the current portfolio design does not bear resemblance to your investment personality, it is sensible to review the appropriateness of the asset mix.

Make your best informed choices. Invest when you feel comfortable.

About Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA  My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971. I then attended the University of British Columbia, graduating with the MBA in 1972. I have attained the “Discretionary Portfolio Manager” professional designation. I am committed to offering clients the highest standard of personal service by providing prompt, courteous and professional attention. My advice is objective, unbiased and without conflicts of interest. I’m part of a team that delivers comprehensive services and best value in managing client wealth.