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Finding out what type of investor you are is an essential part of establishing your financial objectives and then adjusting them as needed.
When you decided to be a dentist, you probably made a choice pretty early on in your academic pursuits: What type of dentist do you want to be? Generalist or specialist? Sole practitioner or partner in a large group practice?
You may not have thought to go through this exercise when you started investing. But finding out what type of investor you are is an essential part of establishing your objectives and then adjusting them as needed. I’m not referring here to young/old, savvy/naïve, wealthy/non-wealthy, or aggressive/conservative. Those are all characteristics of investors. I’m referring to a question you should have answered before you started investing (but if not, you can catch up now!): What type of investor do you want to be?
Types of Investors
There are many ways to categorize, but for the sake of simplicity, we’ll combine them into three main types that are easy to understand: Solo artists, duos, and ensemble bands. None of the types is better or worse than any of the others. Below, we’ll briefly describe each and offer an item for thought for each.
The Solo Artist
If you run your own dental practice and like it that way just fine, that sense of individuality may inform other aspects of your life. As an investor, you’re likely comfortable managing your own accounts. You may know a bit about financial markets and investment vehicles. You’re willing to put in the time to learn about your options, your investments, and funds you are considering. You’re willing to take the risk of managing your own investments, including re-balancing your portfolio as needed and taking advantage of online tools to follow your investments. You don’t want to work with an advisor, and that’s fine.
Advice for the solo artist: Exercise discipline.
One of the biggest challenges you can face as a solo artist is the inability to rein yourself in. You aren’t part of a duo or group that can keep you cool when you get hot, or talk you out of that spoken rap interlude in your jazz tune. Manage your emotions when the market seems like it’s going haywire. You’re in it for the long-term.
This doesn’t have to mean you’re making financial decision with a spouse, and advisor, or a close friend—it just means you have your own strong ideas about how to invest, but you’re willing to bounce ideas off of someone you trust. As you get closer to retirement, you may seek some help re-balancing your portfolio.
Advice for the duo: Seek more accompaniment.
What’s better than having one trusted voice? Having several different perspectives from people you trust. Most retirement providers offer some form of free counseling, whether it’s an online resource or a community of like-minded investors. Think about target-date funds that are mostly managed for you, but in which you can make some allocation decisions. Adding members to the band--within reason-- may elevate your sound without taking away from your individual talents.
You’re not the lead singer or the lead guitarist, and you don’t want or need to be. You have a few close people you trust, and you want to throw out a chord progression or a lyric idea and have the real musical talent turn it into a hit. You don’t have the time or don’t want to make the time investment to do extensive research, and there’s nothing wrong with that, either.
Advice for the ensemble band: Trust…but verify.
Make sure the broker, advisor, or consultant you’ve entrusted to handle your investments is doing so according to your goals and objectives. You don’t have to get into the details, but an occasional look at the plan and its execution will help you make sure everyone is playing from the same sheet music.
No matter what type of investor you are, you can increase your chances of success if you stay true to yourself and your goals. That principle holds true for both your practice and your investment strategy.