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By Adrian Mastracci
North Shore News
Business Section, "Loose Change"
Sunday, May 20, 2001
One of the guidelines that I use in structuring
investment portfolios for my clients is their
particular investment personality. To understand
investment personalities, also known as investor
profiles, let me describe the six personalities
that I have adopted.
1. Guaranteed
Investors with no tolerance for unpredictability
in annual returns. These individuals generally
invest in guaranteed interest vehicles, which
are stable investments having predictable income
and no fluctuation in capital value.
2. Conservative
Investors with low tolerance for variation in
annual returns. These investors usually desire
stability with fairly predictable growth and relatively
little fluctuation in capital value.
3. Moderate/Balanced
Investors who accept a trade-off between growth
and security of capital, without significant variation
in annual returns and small fluctuations in capital
value. These investors are comfortable with a
balanced approach of emphasis between achieving
growth and a steady return.
4. Growth/Business
Investors who are patient and willing to tolerate
some variability in investment returns and some
fluctuations in capital value. Such investors
are primarily interested in growth, with capital
preservation as a secondary consideration. These
are also referred to as "business risk" investors.
5. Aggressive Growth
Investors who seek significant potential growth,
willing to tolerate greater fluctuations in capital
value. Superior long-term investment results are
sought after as the investor accepts much greater
annual volatility in returns.
6. Maximum Growth
Investors who aspire to maximum potential growth,
willing to tolerate significant fluctuations in
capital value. These investors accept a significant
emphasis on equities in order to gain the potential
for long-term growth, and can tolerate greater
annual variations in investment returns. These
individuals are also referred to as speculative
investors.
The characteristic of one's investment personality
is essential information. I structure a client
portfolio that reflects the stated goals and desires
only after considering the client's investment
personality.
I also find that two spouses may each have a
different investment personality and be totally
happy. It is also possible that investment personalities
will change through time.
Often priorities will change as we progress through
our stages in life. Someone first starting out
may be an aggressive investor, while someone approaching,
or during retirement, is more likely to be concerned
with preservation of the portfolio.
On occasion, a client displays two investment
personalities, a primary and a secondary. As an
example, a client with a "growth/business" primary
personality may ask me to design 90 to 95 percent
of the total portfolio within the context of the
primary profile, and the client then guides the
remaining 5 to 10 percent within a "maximum growth"
profile.
Investors may not have thought of themselves
as having a distinct investment personality. If
the current portfolio structure does not bear
resemblance to your investment personality, it
may be prudent to review the appropriateness of
the asset allocations.
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