The “bird symbol” model created by Dr Bender identifies individuals according to four different personality types, each of which comes with its own strengths and weaknesses. In the second of this investing personalities series, we take a closer look at two of the four personality types – the peace-loving dove and the wise old owl – and how you can tap on their unique traits to guide your investment decisions.
Words by Budget Babe
Read Part 1 here: What’s Your Investing Personality?
Not sure what your personality type is? Take this short quiz to find out.
Doves are generally people-oriented folks who prefer to avoid confrontation or conflict. They can be some of the nicest people you’ll ever meet, given their empathy and consideration for treating everyone they meet well.
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When it comes to choosing stocks, Doves are more likely to be swayed by their broker, friends, or fellow investors who are recommending (or criticising) a certain stock. They may prefer to go with what pleases the majority – in other words, the more popular stocks that other people will also go for (usually hyped stocks or blue chips). While this may not necessarily lead to them picking the wrong types of companies, they are more likely to be paying higher prices given their tendency to buy in when others are also buying in.
When reading annual reports, Doves tend to pay more attention to the management running the company. They are more concerned about understanding the key personnel in charge of directing the business, and will look into their backgrounds and track record to understand whether the person is a good leader. If the new CEO hired for the company is from a stellar background, they might be more inclined to add on more units of the stock.
In this world of job change, Doves will get more worried when key management personnel leave the company of their own accord. For instance, the departure of SingPost’s Chief Financial Officer Daniel Phua might lead them to question whether the CFO’s resignation is indicative of weak financials.
If there is a decline in share price, Doves may question who is responsible for the change, and look at who might be able to fix the problem. Trust in management is probably one of the important factors governing a Dove’s investment decision.
Advice: What should you do if you’re a Dove? While people are indeed the heart of a business, and good management can turn a bad company around, you should not forget to take other factors into consideration. Don’t simply let management roles and actions dominate your decisions.
Owls tend to be more analytical, methodical, detail-oriented and meticulous. They favour numbers and statistics, in-depth research and data. However, they also tend to shun risks and seldom make decisions based on personal feelings or opinions.
Most Owls tend to be value investors, given their penchant for facts and minute details. They will pore over multiple sources of company data, including annual reports, financial statements, company announcements, analysts’ reports, and whatever other relevant research materials they can find. Even if someone recommends them a good stock, it may take them weeks or even months before they purchase it, as they prefer to do their own thorough due diligence first.
When it comes to selecting stocks, stocks that are hyped at the moment may not sit very well with the Owls, as Owls generally dislike companies which are showy and loud – think puffed-up public relations or investor relations statements, excessive advertising, or even just companies that are overhyped. Owls prefer the quiet gems, rather than the obvious ones that everyone is talking about.
When reading annual reports, Owls prefer to flip immediately to the charts and financial statements instead of skimming through all the fanciful words and management’s take on the current and future direction of the company. They get excited when the financial fundamentals of a company are good, and care less about what the market thinks of it.
Owls are usually not risk-takers, so they tend to value calculations of a stock’s intrinsic price and ensure that they have a margin of safety for the price they purchase it at. It is of vital importance to an Owl that he or she truly understands how the company operates and how its growth or profits are derived. Unlike Doves, Owls are less concerned with the actual people behind the company as compared to the performance of the company over time.
Advice: A true Owl is rare, but they are one of the best personalities suitable for investing as they seldom let their emotions influence their decisions. This can help them ride out the wave and even find value buys when everyone else is shunning the company. However, if you’re an Owl, do bear in mind that while numbers are important, it does not always tell the whole story, nor may it adequately represent future trends and changes. Market sentiment can also vastly affect the share price, and it is worth taking this into consideration when you calculate or make future projections of profits.
Are you a Dove, an Owl, a bit of both or neither? Stay tuned for Part 3, where I’ll talk about the last two personality types and dish out more advice on how you can tap on your personality traits to invest smarter.
Read Part 3 here: Investing Personality: Are You a Peacock or an Eagle