Which Type of Investors Are You?
I got this from an Indonesian mailing list (so please, if you know who’s the first one that wrote this, let me know so I can rightly credited him/her).
Five investing styles that dominates today:
- Value investors, rely on fundamental analysis of companies’ financial performance to identify stocks priced below intrinsic value (the present value of a company’s future cash flows, discussed in ensuing chapters). This trategy dates back to Benjamin Graham and David L. Dodd of Columbia University in the 1930s. It has gained favor since the 1970s and 1980s because Berkshire Hathaway Inc. CEO and Chairman Warren E. Buffet has embraced it (and got filthly rich on doing so).
- Growth Investors, seek companies whose earnings gains promise to boost intrinsic value rapidly. Investor and author Philip A. Fisher pioneered this value investing variation in the late 1950s. Magellan Fund manager Peter Lynch boldly extended it in the 1980s.
- Index Investors, buy shares that replicate a large market segment such as the Standard & Poor’s 500. Graham endorsed the virtues of this stock selection strategy for defensive investors. Vanguard Fund founder John C. Bogle popularized the method in the 1980s.
- Technical Investors, use charts to glean market behavior indicating whether expectations are rising or falling, market trends, and other “momentum” indicators. This technique is championed by Investor’s Business Daily founder William J. O’Neil and was widely practiced during the late 1990s
- Portfolio Investors, ascertain their appetite for investment risk and assemble a diversified securities portfolio bearing that risk level. The theory was developed in the 1950s, perfected in the 1970s by a group of Nobel Prize winning economists and popularized beginning in the early 1970s by Princeton University economist Burton G. Malkiel in his famous book A Random Walk Down Wall Street.
Of course there are other types of investor that is not described as above (simply because they have less following) such as the Contrarian Investor which buy or sell the stocks by pitting it against the market direction.
How about you? What’s your style?
Nice little summary list there…I’d like to think I’m a little of each of those categories when it comes to investing as I like to use different research techniques prior to putting my money into a stock.
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