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By discovering your money personality, you can begin to understand your attitude toward finances, which can help increase your chances of building wealth. You’ll know whether a balanced or more conservative investment approach will give you the confidence to stay in the market over the long haul, increasing the overall performance of your portfolio. Making smart moves now can improve your retirement plan statements at the end of the year. So let’s get to it.
Match Your Investments to Your Personality
If you’ve been debating whether investing in the stock market is right for you, it may be a good idea to find out what type of investments match your money personality. The hope is that by integrating your dominant personality traits with the characteristics of your investments, you will have a better personal experience with saving and investing, and better investment results over the long run.
Kathleen Gurney, CEO of Financial Psychology Corp., collaborated with the GE Center for Financial Learning on a quiz to help determine your money personality. (The quiz can be found at www.financial learning.com/ge/home.jsp.)
Gurney, who has analyzed the psychology of financial behavior for years, says that personality traits such as risk tolerance, confidence, trust, and pride have an impact on how satisfied a person may feel about investing.
Also, “since investments differ widely, you have to consider the potential return, the risk involved, the liquidity (rapidity with which you can sell at a reasonable price), and whether the investment generates income or requires additional cash over its life,” she says.
Gurney also notes that control over investments can be a major factor for some people. For example, “owning a small share in a large corporation gives you essentially no control,” says Gurney. “Owning a rental property allows you the control of painting it, fixing repairs, insuring it, and collecting rents.”
Taking the Moneymax Money Personality Profile on the aforementioned Website can help you understand why you react to the market the way you do. You can then use that information to restructure the investments within your 401(k), IRA, and other retirement vehicles to make you more comfortable with the process. This will allow you to stay the course as we go through one of the most difficult investment periods in years.
After you take the Moneymax quiz, you should be able to tell which of the following nine groups you fall into:
- Safety Players — cautious and security-oriented
- Entrepreneurs — performance-driven and goal-oriented
- Optimists — positive and confident
- Hunters — aspiring but self-doubting
- Achievers — proud and conservative
- Producers — hardworking but frustrated
- High Rollers — sensation-seeking and creative
- Perfectionists — highly analytical and thorough
- Money Masters — wise wealth accumulators who focus on value, enjoy a high level of participation in managing their money, and pride themselves on making practical investments.
Take a Balanced Approach
ith the stock market showing such great volatility over the last five years — some years were great for stocks but disastrous for bonds (1998, 1999), while others were great for bonds and horrible for stocks (2000, 2001) — it had been difficult to predict what 2002 would bring. That’s why it’s best to have investments in