What Type of Investor Are you?
What type of investor you are will change over your lifetime. The investor’s life cycle progresses through a series of four phases, each characterized by different investment objectives and constraints.
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Phase 1 - Accumulation:
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These are typically young investors seeking aggressive growth.
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Phase 2 - Consolidation:
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Investors in the consolidation phase are most often 45-65 years old. They have generally accumulated considerable assets and see retirement planning as more critical.
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Phase 3 - Spending:
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These are usually retired or semi-retired investors who still have long investment horizons. They need to manage their retirement accounts effectively in order to achieve their desired lifestyle while not outliving their wealth.
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Phase 4 - Gifting:
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These investors are likely to have assets remaining at the end of their lives. The focus is on estate planning.
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Determining where you are in this life cycle will help us define your investment goals, including what type of investor you are and what type of portfolio best suits your needs. Using this information, we will help plot a course in the right direction towards your financial goals. We will examine your time horizon, cash flow, tax situation and risk tolerance, as well as other factors such as the need for college funds or health care. Before we develop an asset allocation and select asset managers and funds, your investment objectives will be established. The primary investment objectives are:
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Investment Objectives
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Investor Profile
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Objective Description
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Aggressive Growth
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These investors typically have a time horizon of 10+ years and a high tolerance for risk.
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An aggressive growth portfolio seeks long-term capital growth without consideration of current income. Its asset allocation is aggressive in that it only invests in equity funds, so involves significant risk volatility over the short run.
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Capital Appreciation
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These investors generally have a time horizon of ten years or more, or they wish to take advantage of the higher returns potentially offered by more volatile asset classes.
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Investment portfolios with a capital appreciation objective involve a fair degree of risk in order to achieve higher long-term total returns on investment. Growth of capital is a clear priority over minimizing portfolio volatility.
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Balanced
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These investors often have a time horizon of five to ten years and moderate risk tolerance.
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The balanced portfolio seeks income and capital appreciation by investing in a diversified asset allocation. The portfolio invests significantly in bonds while allocating the remaining assets to widely diversified stocks.
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Balanced 2
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Most of these investors have a time horizon of three to five years and moderate risk tolerance.
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These portfolios are characterized as having dual goals. They look for capital growth while dampening volatility through a balance of stock and bond funds.
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Income
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These investors are typically retired. They have a moderate to low risk tolerance and are often spending their principal.
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This portfolio seeks income, along with a small amount of capital appreciation to keep pace with inflation. It invests in a diversified asset allocation with a heavy emphasis on fixed income securities.
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Capital Preservation
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These investors are normally retired. They have a low risk tolerance and are usually spending their principal.
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The capital appreciation portfolio seeks income and capital preservation by investing in a diversified asset allocation. It invests in a high percentage of bonds and has readily available cash reserves.
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