An investor profile or style defines an individual’s preferences in investment decisions, for example:
- Short term trading (active management) or long term holding (buy and hold)
- Risk-averse or risk tolerant / seeker
- All classes of assets or just one (stocks for example)
- Value stock, growth stocks, quality stocks, defensive or cyclical stocks…
- Big cap or small cap (Market capitalization) stocks,
- Use or not of derivatives
- Home turf or international diversification
- Hands on, or via investment funds
What determines an investor profile
The style / profile is determined by
- Objective personal or social traits such as age, gender, income, wealth, family, tax situation, opportunities.
- Subjective attitudes, linked to the temper (emotions) and the beliefs (cognition) of the investor.
Balance between risk and return
An investor’s style is shaped by his or her sense of balance between risk and return. Some investors can tolerate greater risk to have greater return. Some investors want less risk and are content with a reasonable return.
- Generally, the investor’s financial return / risk objectives, assuming they are precisely set and fully rational. (???)
Areas of focus
An investor profile is shaped by the area that an investor chooses to focus on; such as:
- stocks or bonds,
- technology, commodity, or real estate
- small-cap or large-cap companies
An investor profile is also shaped by the strategy the investor uses:
- ethical investing
- growth investing
- index investing
- quality investing
- value investing
An investor profile is also shaped by the valuation method the investor uses:
- fundamental analysis
- technical analysis
- quantitative analysis
- ^“Is Greed Or Envy Your Investing Style? Take Our Quiz And Save Yourself”.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.