What's your Investing Personality?
Take this quick quiz to learn about how behavioural insights might help explain your investment decisions.
Passive Preservers prefer to avoid risk and preserve the wealth they already have, rather than take risks to try and grow their wealth further. Typically, they have gained most of their wealth through employment earnings (possibly together with an inheritance) rather than through investing. Passive Preservers’ top financial priorities are likely to include providing for family members.
Passive Preservers often don’t feel too confident about investing and, because their financial priorities are likely to be tied to family, investing can come with high emotional stakes for them. As a result, they’re likely to worry about the short-term performance of their investments, and might need more assurance before making changes to their investments.
A focus on preserving wealth can make sense for those who already have high wealth levels and are at a later life stage. If this doesn’t apply to you, you may want to think about whether behavioural biases might be influencing your investment decisions.
Consider the following questions, which look at key biases Passive Preservers might hold—click anywhere in the question to reveal the bias that question is meant to test for:
Imagine you make an investment that drops 25 per cent in the first six months. You’re not sure if it will recover. What would you likely do?
Answer A reflects loss aversion—our tendency to feel losses more intensely than equivalent gains. Learn more about loss aversion here
Imagine you sold all of your investments at a 30 per cent loss due to a market crash. Market conditions later show signs of improvement. How would you feel about starting to invest again?
Answer B reflects regret aversion—our bias towards avoiding regret. Learn more about regret aversion here.
Assume you make an investment based on your own research. A friend presents you with information that contradicts your belief about this investment. How would you respond?
Answer A reflects status quo bias—our tendency to stay the course and not react to new information. Learn more about status quo bias here.
Check out the other investing personalities: Friendly Follower, Independent Individualist, Active Accumulator.
One last thing: This quiz isn’t meant to reach any definitive answers about your investing personality. A longer quiz with more detailed questions could lead to a different conclusion about your investing personality. What’s more, your personality may vary over time, depending not only on your life stage but how you’re feeling on a given day. But we do hope you found the quiz engaging and that it helped you learn more about some of the factors that could be influencing your investment decisions.
Source: Our quiz, personality descriptions and illustrative questions on biases draw from Michael Pompian, “Using Behavioral Investor Types to Build Better Relationships with Your Clients,” Journal of Financial Planning (October 2008). Questions and concepts have been condensed to reflect the more limited purpose of our quiz.
Friendly Followers tend to have some investing knowledge, but they aren’t too interested in managing the details of their investments on their own—after all, they have a life outside their finances to deal with!
Instead, Friendly Followers are likely to follow advice from their friends, colleagues, or financial representative when making investment decisions. They often want to be in the latest, most popular investments, even if these investments don’t fit their long-term financial goals or the market climate for these investments doesn’t look good. They may overestimate their risk tolerance and might not diversify their investments enough.
When it comes to preparing for your financial future, learning about investing is key. But it’s also important to make a long-term plan and stick to it—behavioural biases can leave you more likely to be distracted by the “next big thing.”
Consider the following questions, which look at key biases Friendly Followers might hold—click anywhere in the question to reveal the bias that question is meant to test for:
Do you ever make investment decisions based on word-of-mouth or name recognition?
Answer A reflects the availability heuristic—our tendency to make decisions based on what’s top of mind rather than doing deeper research. Learn more about the availability heuristic here.
Do you think investment outcomes are generally predictable or unpredictable?
Answer B reflects hindsight bias—our tendency to see things as inevitable or easily predictable in hindsight (even if they really weren’t). Learn more about hindsight bias here.
You’re considering buying an investment. You’re also told that there is a 75% chance that the investment will make money or maintain its current value. You conclude the investment fits within your risk tolerance. You’re then told that there is a 25% chance that the investment will lose money, and that you could lose your entire investment. Does this additional information affect your view of that investment’s riskiness?
Answer A reflects framing bias—our tendency to make different choices based on how information is presented to us. Learn more about framing bias here.
Check out the other investing personalities: Passive Preserver, Independent Individualist, Active Accumulator.
One last thing: This quiz isn’t meant to reach any definitive answers about your investing personality. A longer quiz with more detailed questions could lead to a different conclusion about your investing personality. What’s more, your personality may vary over time, depending not only on your life stage but how you’re feeling on a given day. But we do hope you found the quiz engaging and that it helped you learn more about some of the factors that could be influencing your investment decisions.
Source: Our quiz, personality descriptions and illustrative questions on biases draw from Michael Pompian, “Using Behavioral Investor Types to Build Better Relationships with Your Clients,” Journal of Financial Planning (October 2008). Questions and concepts have been condensed to reflect the more limited purpose of our quiz.
Independent Individualists are self-assured and trust their gut when making investing decisions. They’re confident investors who enjoy doing research and are comfortable taking risks. But their confidence might lead them to jump to conclusions too quickly, acting on the first few pieces of information they can get their hands on without seeking corroboration from other sources.
While Independent Individualists might work with a financial services representative, they may make additional investments on their own without telling their representative. And while they might sign onto a financial plan, they may resist following it. They’re also likely to maintain their positive opinion about their investments even if market conditions change—as they see it, the market’s wrong, not them, and the market will come around to their point of view sooner or later.
Independent Individualists can mitigate the effects of behavioural biases on their decision-making by being mindful of their tendency to strike out on their own and go against the consensus, and remembering to refer back to a financial plan and seek corroborating evidence before making major decisions.
Consider the following questions, which look at key biases Independent Individualists might hold—click anywhere in the question to reveal the bias that question is meant to test for:
Assume you make an investment based on your own research. A friend presents you with information that contradicts your belief about this investment. How would you respond?
Answer A reflects status quo bias—our tendency to stay the course and not react to new information. Learn more about status quo bias here.
Do you ever make investment decisions based on word-of-mouth or name recognition?
Answer A reflects the availability heuristic—our tendency to make decisions based on what’s top of mind rather than doing deeper research. Learn more about the availability heuristic here.
Suppose you make an investment based on your own research. The investment gains in value, but not as much as you thought it might and not as much as the market as a whole. What would you likely do?
Answer B reflects confirmation bias—our tendency to interpret new information in a way that confirms our existing beliefs. Learn more about confirmation bias here.
Check out the other investing personalities: Passive Preserver, Friendly Follower, Active Accumulator.
One last thing: This quiz isn’t meant to reach any definitive answers about your investing personality. A longer quiz with more detailed questions could lead to a different conclusion about your investing personality. What’s more, your personality may vary over time, depending not only on your life stage but how you’re feeling on a given day. But we do hope you found the quiz engaging and that it helped you learn more about some of the factors that could be influencing your investment decisions.
Source: Our quiz, personality descriptions and illustrative questions on biases draw from Michael Pompian, “Using Behavioral Investor Types to Build Better Relationships with Your Clients,” Journal of Financial Planning (October 2008). Questions and concepts have been condensed to reflect the more limited purpose of our quiz.
Active Accumulators are entrepreneurial, strong-willed, and confident. They enjoy the thrill of making a good investment and tend to be hands on in their relationships with financial representatives. Confident they can beat the market, they might not agree with or follow widely-accepted investment principles such as diversification.
Active Accumulators are quick decision makers. They might chase higher risk investments that their friends or colleagues are suggesting. They’re also likely to trade their investments relatively frequently, resulting in higher costs that can lower their returns. Confident that things will work out, they may feel tempted to make impulse purchases at the expense of saving for the long-term.
The key challenge for Active Accumulators is to curb their tendency towards overconfidence. It’s important for them to slow down, think about their long-term financial goals, and take a hard look at the evidence before making a decision.
Consider the following questions, which look at key biases Active Accumulators might hold—click anywhere in the question to reveal the bias that question is meant to test for:
Suppose you make a winning investment. How do you generally attribute the success of your decision?
Answer A reflects overconfidence bias—our tendency to be overly optimistic about our abilities and about future outcomes. Learn more about overconfidence bias here.
Do you consider yourself more of a spender than a saver?
Answer A reflects short-termism—our tendency to favour the immediate over the long-term. Learn more about short-termism here.
You are offered two free lottery tickets. You may either select your own numbers or have a machine do it. What would you do?
Answer B reflects illusion of control bias—our tendency to overestimate our ability to control events. Learn more about illusion of control bias here.
Check out the other investing personalities: Passive Preserver, Friendly Follower, Independent Individualist.
One last thing: This quiz isn’t meant to reach any definitive answers about your investing personality. A longer quiz with more detailed questions could lead to a different conclusion about your investing personality. What’s more, your personality may vary over time, depending not only on your life stage but how you’re feeling on a given day. But we do hope you found the quiz engaging and that it helped you learn more about some of the factors that could be influencing your investment decisions.
Source: Our quiz, personality descriptions and illustrative questions on biases draw from Michael Pompian, “Using Behavioral Investor Types to Build Better Relationships with Your Clients,” Journal of Financial Planning (October 2008). Questions and concepts have been condensed to reflect the more limited purpose of our quiz.