How Investor Profiling Is Changing The Way Investment Advice Is Given
|Over the last few years psychologists have discovered that investors appear to fall into |
|'types', and that knowing what 'type' of investor an individual is can feed into improved |
|investment gains. Jonathan Myers examines the current state of play. |
|Every investor is different, with different financial goals, different tolerances to risk, different personal situations and |
|different desires. From the point of view of investment management, these characteristics are often defined more rigorously as |
|objectives and constraints. Objectives being the type of return being sought, while constraints include factors such as time |
|horizon, how liquid the investor is, any personal tax situation and how risk is handled. |
|Nevertheless, it's really a balancing act between risk and return, with each investor having unique requirements, as well as a |
|unique financial outlook. What must remain constant throughout, however, is the delivery of an investment program that is not |
|only specific to an investor's personal needs but that also works well and provides financial security for the future. Within |
|these constraints too, there should also be the opportunity to have some fun with investments if clients should so wish. For |
|example, by, say, using a small proportion of available funds for dealing in more speculative investments such as technology |
|companies or emerging market stocks.... [continues]
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