The ancient Greek expression “know thyself” carries a lot of weight when it comes to investing. An investor’s personality can speak volumes to his or her ability to spot opportunities and avoid risk. If more people truly “knew themselves” when it came to money during the last decade, we may not have seen many of the individual excesses and mistakes that marked the recent economic slowdown.

Many companies and experts have attempted to label various money personalities. While there is no definitive set of definitions, taking a look at these efforts can at least get you thinking about where you are on the spectrum and how that affects your decision-making. One of the most recent high-profile efforts came from financial services firm TransAmerica in 2008 with its study revealing four basic investing personalities. They include:

  • Venturers take a “nothing ventured, nothing gained” attitude with their money, but their potential pitfall is that they’re overconfident in their level of preparedness.
  • Anchored individuals always “stay on the safe side,” but extreme risk aversion might leave them unprepared.
  • Pursuers will “try anything once,” but their continual efforts to grab at new directions might leave them without a clear plan.
  • Adapters take investment situations “as they come,” but may not be realizing their full potential as investors.

Now, even if you have a handle on your money personality, what do you do with that information? It might make sense to seek advice from a trained financial professional to review the plans you’ve made and help you plot a course that suits your comfort level and goals.

One of the toughest aspects of creating a financial plan is recognizing how your personal style, mindset, and life situation might affect your investment decisions. A financial professional will understand this challenge and can help you think through your choices.

To watch a brief video on how personality affects financial planning, click here. 

This article was adapted from a piece by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Mike McCann, a local member of FPA.