Page 17 - DCOM507_STOCK_MARKET_OPERATIONS

Stock Market Operations

Notes 1.4.2 According to a New Study

Your personality is losing your money – not the market. All investors make mistakes; it is all
part of the learning process. That is a given. But what isn’t so obvious is that an investor’s
personality has a big hand in determining what investing mistakes he or she is most likely to
make. That was a key finding of a study done by the research firm of Mathew Greenwald &
Associates Inc. for Merrill Lynch investment managers. Merrill divided the investors into four
distinct personality types. See if you can find a match for yours…..

Measured Investors

Measured investors are secure in their financial situation and confident they will have a
comfortable retirement. These investors are least likely to say they waited too long to start
investing or that they haven’t invested enough. Moreover, they are least likely to be plagued by
emotions such as fear and anxiety that commonly cause investment mistakes. The most common
mistake is not letting go of losing investments.

Reluctant Investors

Reluctant investors don’t particularly enjoy investing and prefer to spend as little time as possible
managing their holdings. Not surprisingly, this group is the most likely to have a financial
adviser. Reluctant investors are least likely to become overly attached to an investment or to put
too much money into a single holding.

Competitive Investors

Competitive investors can have a hard time letting go of losing investments, often dedicate too
much of their portfolio to one stock or investment and tend to be greedy and chase hot stocks.
Competitive investors enjoy investing, are informed and try to beat the market.

Notes They are most likely to have started investing early, to put enough money into
their investments and to invest regularly. On the downside, their enthusiasm for investing
“can be a detriment if left unchecked”.

Unprepared Investors

Unprepared investors, characterized as unhappy with their financial situation and lacking in
confidence. They tend to start investing late and are the least likely to rebalance their portfolios.
The survey involved 1,000 Indian investors who had annual household income of at least 275,000
(INR) and at least 100,000 in assets to invest. When asked for the reasons they make mistakes,
64% said they just happen.

Self Assessment

Fill in the blanks:
11. The ..................................... investor does not enjoy investing and prefers to spend as little
time as possible on his or her investments.
12. ..................................... investors spend time and energy understanding their investments
and are willing to pay for sound financial advice.

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