Every investor has a distinct investment style which makes him take certain decisions. This style is the combined outcome of several factors-personal traits, perceptions and previous investing experience. Take this quiz to know what is your investment style and how it impacts your investments.
Why do you invest in the stock market?
a) To earn a steady stream of income through dividends.
b) To put extra money to good use and build wealth over a period of time.
c) To experience the thrill of booking profits regularly.
Before investing in a particular stock, you...
a) Carefully evaluate your options.
b) Seek friendly advice or expert recommendations, but supplement it with your own research.
c) Rely on your gut feeling.
Your decision to buy a stock will be primarily made on the basis of...
a) Ensuring safety of the capital.
b) The ability to deliver inflation-beating returns.
c) Earning high returns even if it means taking on higher risk.
How often do you check the health of your investments?
a) Only when I want to review my portfolio.
b) I occasionally check the health of my portfolio.
c) I rarely go to sleep without checking how my portfolio is doing.
What does ‘risk’ mean to you?
a) Loss of capital.
b) Uncertainty over returns.
c) Opportunity to make big profits.
How much volatility is acceptable to you?
a) I don’t mind average returns but can’t stand stock prices moving like a yo-yo.
b) I am not bothered by intermittent ups and downs if my conviction is strong.
c) I can hold on to my stocks if I truly believe that the payoff will be huge.
What percentage of your portfolio would you devote to your favourite stock?
a) I will give it the highest weightage but not more than 20% of my total portfolio.
b) Between 20% and 30%.
c) More than 30%.
You hear rumours that a firm has developed a miracle cure. Will you...
a) Ignore the development, you don’t invest on rumours.
b) Try to get more details and research the company.
c) Buy the stock immediately.
A stock you hold falls 25%. What will you do?
a) Hold on to the stock hoping that it will turn around eventually.
b) Analyse the reasons for the price drop before making a decision.
c) Sell the stock immediately and move on to something better.
What type of company will you invest in?
a) A stable, mature company with a leadership position in its industry and which yields healthy dividends and is largely unaffected by economic cycles.
b) A developing company with a strong growth potential that has proven abilities and provides decent scope for capital appreciation.
c) A relative newcomer without a track record but an innovative business model or unique offering which may potentially carve out a niche for itself.
Find out your style: If your answers are mostly...
Why do you invest in the stock market?
a) To earn a steady stream of income through dividends.
b) To put extra money to good use and build wealth over a period of time.
c) To experience the thrill of booking profits regularly.
Before investing in a particular stock, you...
a) Carefully evaluate your options.
b) Seek friendly advice or expert recommendations, but supplement it with your own research.
c) Rely on your gut feeling.
Your decision to buy a stock will be primarily made on the basis of...
a) Ensuring safety of the capital.
b) The ability to deliver inflation-beating returns.
c) Earning high returns even if it means taking on higher risk.
How often do you check the health of your investments?
a) Only when I want to review my portfolio.
b) I occasionally check the health of my portfolio.
c) I rarely go to sleep without checking how my portfolio is doing.
What does ‘risk’ mean to you?
a) Loss of capital.
b) Uncertainty over returns.
c) Opportunity to make big profits.
How much volatility is acceptable to you?
a) I don’t mind average returns but can’t stand stock prices moving like a yo-yo.
b) I am not bothered by intermittent ups and downs if my conviction is strong.
c) I can hold on to my stocks if I truly believe that the payoff will be huge.
What percentage of your portfolio would you devote to your favourite stock?
a) I will give it the highest weightage but not more than 20% of my total portfolio.
b) Between 20% and 30%.
c) More than 30%.
You hear rumours that a firm has developed a miracle cure. Will you...
a) Ignore the development, you don’t invest on rumours.
b) Try to get more details and research the company.
c) Buy the stock immediately.
A stock you hold falls 25%. What will you do?
a) Hold on to the stock hoping that it will turn around eventually.
b) Analyse the reasons for the price drop before making a decision.
c) Sell the stock immediately and move on to something better.
What type of company will you invest in?
a) A stable, mature company with a leadership position in its industry and which yields healthy dividends and is largely unaffected by economic cycles.
b) A developing company with a strong growth potential that has proven abilities and provides decent scope for capital appreciation.
c) A relative newcomer without a track record but an innovative business model or unique offering which may potentially carve out a niche for itself.
Find out your style: If your answers are mostly...
a) Conservative investor
You are comfortable with low risk, even if it means passing up the chance for getting higher returns. You like investments that are likely to yield steady returns and steer clear of hot tips and rumours. You also believe in long-term investing. However, you are probably too conservative and this could limit your portfolio returns.
b) Balanced investor
You are looking for a combination of growth and income, with an emphasis on growth. You are patient with investments and don’t let emotions take over. You accept the risk of short-term declines to achieve long-term growth. You like to take informed decisions and invest only on sound rationale.
c) Aggressive investor
You enjoy the roller-coaster ride of the stock market but sometimes let fear and greed drive your decisions. You are not afraid to take risks and want to make a quick buck even though you know it may lead to losses. You can be impatient with investments and are constantly on the lookout for stocks poised to shoot up.
Investing style of the masters
Warren Buffett:
He has a value driven investment style which is based on looking for undervalued stocks–companies whose market value is less than their intrinsic value. Buffett only buys businesses with sound management and invests purely for the long term.
“The first rule is to never lose money. The second rule: never forget the first rule.”
Peter Lynch:
Described as a ‘chameleon’, Peter Lynch adapted to whatever investment style worked at the time. He also believed in investing only in what he knew, and was known for a strong research-based approach.
“Go for a business that any idiot can run, because sooner or later, any idiot is probably going to run it.”
George Soros:
He has a speculative approach to investing and looks constantly for quick and big gains. Soros specialises in turning broad economic trends into highly leveraged plays. He doesn’t care for diversification or holding for the long term.
“It’s not whether you’re right or wrong that is important, but how much money you make when you’re right and how much you lose when you’re wrong.”
