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The Vancouver Sun
Smart Money
Monday, July 2, 2001
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| Adrian Mastracci says there
are six types of investment personalities |
Investors who want to develop or review their
long-term investment portfolio should first come
to terms with their investment personality.
U.S. research shows that buying high and selling
low -- almost always the result of chasing last
year's top performer -- caused a shortfall of
20 per cent to the average mutual fund investor
over the past decade.
From January 1990 through March 2000, the average
mutual fund's mean return was 10.92 per cent while
the average invested dollar gained only 8.7 per
cent over the same period, according to Boston's
Financial Research Corp.
The study cites investor propensity for chasing
performance, as measured by rising mutual fund
redemption rates and shortened holding periods,
as the main reason for losing performance.
In coming to terms with your own investing style,
you should consider the feelings of a spouse who
will often have a different comfort level with
various investments, and recognize that attitudes
can change over time.
"Priorities often change as we progress through
life," says fee-only financial planner Adrian
Mastracci.
"Someone first starting out may be an aggressive
investor, while someone approaching, or in the
midst of retirement, is more attentive to the
preservation of the nest egg."
Mastracci, president of Vancouver's KCM Wealth
Management, says people generally fit into
one of six broad types of investment personalities:
1. Guaranteed
Investors with no tolerance for unpredictability
in investment returns. They 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 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. They
are sometimes known as "business risk" investors.
5. Aggressive Growth
Long-term investors who seek significant potential
growth and are willing to tolerate greater fluctuations
in capital value.
6. Maximum Growth
Investors who aspire to maximum potential growth
with a significant emphasis on equities and are
willing to tolerate significant fluctuations in
capital value. These investors are also referred
to as speculative investors.
In cases where investors display two investment
personalities, Mastracci says it can make sense
to indulge the more daring side with 10 or 20
per cent of the portfolio and invest the rest
more cautiously in line with their long-term objectives.
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