Blog | Personal Finance

Not All Investors Fit the Same Mold

There are 3 different types of investors, so don’t let self-limiting beliefs hold you back from financial freedom

A few years ago, I was chatting about financial freedom with a close friend. My friend was very interested in becoming financially independent, and really wanted to discuss how she could increase her wealth. Knowing there are three different types of investors, I was eager to help her figure out which category she’d fall into.

However, when I shared my journey to financial independence with her, she had some serious reservations.

“Becoming financially independent sounds great. It's exactly what I want — but my personality is so different from yours. I could never do what you did.”

“What do you mean?” I asked.

“Well, my mind doesn't work like an investor's. I'm a right brain thinker, so I don't do well with numbers and figures. Also, I'm an introvert. I'm too shy to start a business. So I don't know what else I can do, but I’m definitely not one of those investor personality types.”

My friend was very attuned to her personality characteristics — and while being self-aware is a useful trait, her beliefs were actually holding her back. She believed an investor needed to be an expert with numbers and a business owner needed to be an extravert who loved working with people. Since she didn't have these qualities, she automatically thought that she couldn't be financially successful. She was so stuck in these preconceived notions that she couldn't think outside the box and find a path that worked for her.

Now, I love personality tests as much as the next person. They can be a really fun way to learn more about yourself and the way you think. However, oftentimes people let these personality labels become excuses for not starting their journey to financial freedom.

When that happens, these traits become very detrimental to your financial health.

When I thought about it later, I realized my friend was being fueled by three faulty beliefs. First, she was focusing on her weaknesses and not her strengths. Second, she believed her personality traits were set in stone, and that she couldn't change them. And third, she didn’t realize there were different types of investors.

Focus on your strengths not weaknesses

My friend's first problem was that she was so busy focusing on how her personality weaknesses were holding her back, that she couldn't see how her strengths could help her move forward.

Personality traits can be a huge asset on your journey. Every personality type has strengths that can help them achieve financial freedom.

For example, let's look at one very broad way we can categorize people: optimists and pessimists. Optimists tend to be very positive about the future, and believe in successful outcomes. Pessimists, on the other hand, tend to be more dubious and wary.

Both personality types have their drawbacks, but they also have their strengths. Optimists might be more inclined to try new things because they believe in their chance of success. Pessimists might use their wariness to put in a lot of research and planning ahead of time because they know that things could easily go wrong.

Both methods are effective, despite how different they are. In the world of financial freedom, it's not about which is better, or how you should change who you are. Instead, it's about working with the strengths of your personality type to move forward and help you achieve your goals.

Find your passion

Your personality can also help you figure out which direction you want to take on your financial journey.

There are so many different ways people achieve financial freedom. They invest in paper stocks or invest in real estate. They start businesses and buy commodities. Many investors have a portfolio that combines all of the above. The options for generating wealth are limitless.

With so many choices, it can be overwhelming when you first start out. That's where your personality traits, strengths, and passions come in to help you figure out where to put your focus — and it’s precisely why there’s more than just one investor personality type.

For example, in the beginning of her journey to financial freedom my friend might not have felt comfortable investing in paper stocks because she had a hard time wrapping her mind around complex numbers. But real estate, a more tangible asset, might have made more sense to her. She used real estate all the time! She understood how markets worked because she lived, worked, and played in them. Her creative right brain would have thrived in real estate because she would have been be able to focus on the buildings and people right in front of her, instead of intangible stocks.

But by letting her fear of numbers hold her back, she wasn’t able to see just how successful she could have been.

Let your personality be your guide

Let's look at my friend's other complaint. She believed she couldn't start a business because she was too introverted. But these days, starting a business doesn't require tons of people. In fact, you only need one person to start a business: you!

With a laptop and Internet connection, even the most introverted and shy person can create a flourishing online business. But because she was so set in her beliefs about what it took to start a business, and what she believed her weaknesses were, my friend couldn't even let herself try.

If my friend had listened to her personality strengths, instead of focusing on her weaknesses, she could have found an incredible path to success that was unique to her. She could have worked with her personality, instead of bemoaning the challenges it posed.

Let your personality be your guide to investing in a way that makes you money and also brings you joy. The last thing you want to do is make investing miserable. Don't force yourself to invest in something if you aren't passionate about or even interested in it.

Instead, let your interests and personality traits help you discover an investment you love. If there weren’t a variety of investor personality types, just think about what a boring world this would be!

Start by researching your options. If you don't think you'd be interested in real estate, do some research into commodities. Or businesses. Read books, speak to mentors, enroll in an online investing class. Test the waters and let your characteristics help you find something you are truly passionate about.

Get comfortable being uncomfortable

The other false belief that my friend had that was stopping her from beginning her journey was that she believed personality types were set in stone. Because she didn't understand numbers, she believed she never would be able to. She wasn't even willing to try!

Everything we do has a learning curve, and investing is no different. When you were learning how to drive, you didn't know how to turn your blinker on or how to perform a three-point turn. It was something you had to pick up quickly.

And it was uncomfortable wasn't it? Learning something new always is.

So when getting started on the journey to financial independence, the people who fail are the ones who let their discomfort stop them from moving forward. They get set in their ways and won't try stepping outside their comfort zone, even if the potential rewards are infinite.

I am all for being in touch with your inner self, and knowing who you are. But don't let yourself become so stuck in your ways that you aren't able to grow.

We should always be growing and learning. Success is a process, and it doesn't happen overnight.

When I first started out, I didn't consider myself an extrovert. I loved people, but I was nervous and insecure when I first met them. Now it's second nature. I travel around the world meeting and speaking with all kinds of people without hesitation. I love it!

But it took a lot of uncomfortable cold calls and meetings with investors I didn't know to get me to that level.

The only way to get through that discomfort is by going out there and doing it. It takes practice, and it won't be easy. But it's the only way you'll see the rewards.

And again, investing shouldn't be miserable. But make sure you know the difference between being miserable and being a little outside your comfort zone.

The only personality type that matters

At the end of the day, the only personality type that matters is what type of investor you are.

The way I see it, there are three different types of investors:

1. Type C investors are financially uneducated and look for people to tell them what to invest in. They know little-to-nothing when it comes to finances, which means they have to rely on the advice of other so-called experts.

2. Type B investors seek answers. They ask a lot of questions, interview several advisors, attorneys, stockbrokers, and real estate agents.

3. Type-A investors look for problems. They are good at solving problems and making returns on their money. They have a strong financial foundation and possess the skills necessary to succeed as business owners and investors.

As you can see, these types have nothing to do with personality traits like extraversion or introversion. Instead they have everything to do with your level of financial knowledge, something that is completely within your control.

Plus, you can be all three types of investors. For instance, I am a Type C investor when it comes to mutual funds. I don't like them, so I don't know anything about them. As a Type B investor, I ask questions from professionals I trust. I seek answers from advisors I have relationships with and who I trust to give me solid advice. And as a Type A investor, I find and solve problems and make a lot of money in return.

Becoming a Type A or Type B investor requires a solid financial education and a network of individuals who can help you succeed. It doesn't say anything about being an extravert/introvert or right/left brain focused. Instead, it's all about getting solid financial education, something that anyone can attain no matter their personality type.

All you need is knowledge

Personality traits can help or hurt you, but only if you let them. Instead, embrace who you are and the fact that different types of investors make the world go ‘round.

What matters the most is your level of financial education. Once you start learning more and more, you'll develop the confidence and clarity to discover a path that works with your personality traits. A path that lets you focus on your strengths, and helps you grow and improve your weaknesses.