Adrian Mastracci, portfolio manager at KCM Wealth Management, says “Investment personalities determine the sensible portfolio mix of assets like equities, bonds, cash and real estate."

Vancouver, BC (July 23, 2007): One of the frequently asked questions of investing is about what to invest in.

Warren Buffett once said, "You only have to do a very few things right in your life so long as you don't do too many things wrong."

Adrian Mastracci, portfolio manager at KCM Wealth Management says, “I'd like to highlight one right thing. A key one. Investors who want to successfully manage portfolios should become acquainted with their distinct investment personalities. Also known as investor profiles."

This goes right to the heart of portfolio management. A cornerstone of the financial foundations. It’s a must have in my books.

Investment personalities determine the sensible portfolio mix of assets like equities, bonds, cash and real estate. Asset mix has the biggest impact on investment returns of any other factor.

Investors have unique characteristics. Such as stated goals, life aspirations, specific financial situations, time horizons, investment experiences to draw from and attitudes towards risks.

All these factors assist in selecting the appropriate mix. The result is an asset mix tailored to specific investor needs. For example, financial independence and retirement.

Portfolios that ignore investor profiles can produce undesirable results. Investors are better served with portfolios designed within their investment personalities.

I use six investor profiles in my practice. There is both an art and science element to establishing the most appropriate for each client. Much of it is a dose of common sense.

Let's understand the main characteristics of the six investment personalities:

1. Capital Preservation: Investors with little tolerance for unpredictable returns. These individuals invest primarily in guaranteed interest vehicles. They focus on stable investments, having predictable income and little fluctuation in capital value.

2. Income Oriented: Investors with moderate tolerance for variation in returns. They usually desire stability with fairly predictable growth and some fluctuation in capital value.

3. Balanced Income/Growth: Investors who accept a trade-off between growing and preserving capital. Without significant variation in returns and reasonable capital value fluctuations. They are comfortable with a balanced approach between growth and a steady return.

4. Growth/Business Risk: Investors who are patient and willing to tolerate more bumpiness in investment returns and fluctuations in capital value. They are interested primarily in growth, with capital preservation as a secondary consideration.

5. Aggressive Growth: Investors who seek significant growth potential, willing to tolerate greater fluctuations in capital values. Superior long-term results are sought after. Investors accept much greater swings in returns.

6. Speculative: Investors who aspire to maximum potential growth, willing to tolerate significant fluctuations in capital value. Portfolios accept a very high emphasis on equities to achieve the top potential for long-term growth. They tolerate the highest swings in investment returns.

This table is an overview of the typical targets for the investment profiles:

There are two types of portfolios – “Serious Money”, and “Mad Money”. The serious one is the long-term must during retirement. The mad one tries to hit investment homeruns in the short-term.

My sage advice is that the serious one be at least 80% of the total portfolio. That way, investment sanity prevails if strikeouts occur swinging for homeruns.

Every investor ought to take time to unwrap the profiles. First, to figure out the one that suits best. Then, to manage the personal investments within it. Of course, spouses can have different profiles.

Portfolio allocations should resemble one’s investment personality. Otherwise, a total review of the asset mix is in order.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.