YOUR MONEY: What kind of investor are you?Anthropologists and psychologists like to point to the caveman days for rationale as to why we act certain ways that don't seem normal. Well, now add financial planners to the list of those who are now looking at the animal tendencies for answers as to why people invest their money the way they do.
By: Dan Serra, McClatchy-Tribune News Service
Anthropologists and psychologists like to point to the caveman days for rationale as to why we act certain ways that don't seem normal. Well, now add financial planners to the list of those who are now looking at the animal tendencies for answers as to why people invest their money the way they do. Basically, it comes down to three in my book — monkeys, lizards and squirrels. It could be that our "investor brains" evolved from some of these ani-mals along the way to walking upright.
First, the monkey investors. These investors are the playful, loving type that can be content one minute and then swinging through trees like mad the next. They get easily excited at the next big investment opportunity in hopes of making a killing. Not much thought goes into what they do. Just what will be fun for the moment or what the other monkeys are investing in now. The only good thing about monkeys is sometimes they are right. They take the risks, and while risk can mean big losses, risk can also mean big winners. But in the long run, they usually find themselves right back on the branch where they started.
Next are lizards. The lizards are cautious and don't scamper about aimlessly looking for prey. They are more stealth. But when they do venture out, they are easily startled and scram for cover even though logically whatever startled them is harmless. Investors like these defy logic when investing and get a rush of adrenaline that tells them they are about to be killed in the market. They rush to sell when the market falls and not venture back in until it looks safer. Unfortunately, this lizard brains miss the recovery and have sold at the bottom so they often end up with fewer ants in their belly.
Finally, squirrels offer hope. The squirrel brains are often the most successful investors. These little guys take the time to hunt for nuts to store for the future instead of eating them all in one place. They know the value of accumulation through a methodical process that ensures them they won't starve when times are bad. They go about building their savings with monthly nut deposits, then sit back in the tree and enjoy their leisure time without worry.
What animal is in your investor brain? Once you recognize what it is, you're more likely to be aware of the behavior pattern and make changes for the better.
Dan Serra is a financial planner with Strategic Financial Planning Inc. in Plano, Texas. E-mail him at firstname.lastname@example.org or visit his Twitter page at www.twitter.com/danserra.