Knowing your personality type can help you avoid common investing pitfalls and maximise your profits. In the last of this investing personalities series, we take a closer look at two more temperaments: the showy peacock and the high-flying eagle.
Words by Budget Babe
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Peacocks are the life of the party, and as a friend, the Peacock can infuse much excitement and enthusiasm into your life. Peacocks are optimistic, spontaneous, impulsive, embrace change, and love the thrill of a fast chase. Unfortunately, however, their lack of attention to details and impatience are probably some of the worst traits when it comes to investing.
When it comes to choosing stocks, Peacocks love hearing about hyped stocks that everyone else is talking about. If the majority of people believe that a stock is good, Peacocks tend to be quick to purchase such stocks before properly studying the company’s financials and data. In fact, they may not even look at these details at all, as Peacocks get bored easily by too many details, and can make spontaneous and quick decisions based on their own feelings and perceptions about a company.
It is easy to sell a stock to the Peacock – just tell them why the company is a good stock. For instance, a mere statement that the company is an “industry leader” (a term so loosely vaunted by companies these days) might even be enough to make them buy.
In reading annual reports, Peacocks tend to first look at the CEO’s statement, which usually provides an optimistic (or at best, neutral) painting of the company’s position and forward outlook. They get excited when a CEO or key management personnel says the company is in a good position for growth.
Most Peacocks are not adverse to risk; in fact, some Peacocks even welcome it. While the volatile China stock market may scare away most investors, some Peacocks are more than happy to jump right in. Because of their high risk tolerance, Peacocks may go for riskier stocks, and sometimes tend to trade more than they invest. Their flagrant disregard for risk may lead them to miss out obvious red flags in a company, which can then lead to poor investment decisions.
Advice: A Peacock is one of the most dangerous personalities for investing, as investing without due diligence can be said to be akin to gambling. If you are a Peacock investor, you may need to make a conscientious effort to stop yourself from buying every “exciting” stock you hear about. You should also pay more attention to key financial data, even if they bore you. At the very least, take a look at basic financial ratios like P/E, P/B, ROA, current ratio and debt-to-equity ratio.
Eagles are highly recognised as visionary leaders and high-achievers, often going on to become CEOs or some other successful position in their career. Results-driven, Eagles are often hard workers, find it difficult to accept failure, and thrive in competitive environments. However, Eagles can also come across as too domineering and even arrogant in some cases.
When choosing a stock, most Eagles tend to look at the long-term prospects of a company. They consider what they envision the company to be like in the future and look for sufficient evidence to reaffirm their suspicions. Unsurprisingly, Eagles are either growth investors, value investors, or both.
Although Eagles are driven by results, they can be willing to wait and tide out years before their projected results become reality. As such, they are less concerned with market sentiment or analysts’ recommendations of stocks, as they prefer to choose stocks they foresee a good future for.
The best thing about Eagles is their tenacity – Eagles are not afraid of challenges or difficult times. They are fast to adapt and think of solutions to solve a problem. As such, if a company they truly believe in is currently undergoing a challenging period, the Eagle will not be fast to ditch his or her stock, but rather, support and stand by the company until the troubles are over.
When reading the annual report, Eagles are more drawn to financial charts and graphs which show an overview of past performance, as well as projections for the future. They take a keen interest in planned developments ahead for the company, and may even be willing to accept companies without dividends if they believe that the company will grow and reward them in future in terms of the share price.
Eagles will take trends and market sentiment into consideration, but they will not let that be the driving factors determining their investment decisions. The company they invest in ultimately has to show a good balance of solid fundamentals, potential for growth, and be aligned with future trends or directions.
Advice: Given their successful track record, Eagles tend to evaluate businesses rather than stocks, and may be able to accurately predict the long-term future of a company. However, if you are an Eagle investor, you may also want to look out for confirmation bias, and make it a point to remember that one’s future projections may not always be spot on. In addition, despite the long-term outlook of an Eagle, you should also clearly define your own investment time horizon, and do not hesitate to ditch the company if it is not living up to your expectations after a few years.
Which personality type are you, and did you find this accurate in explaining some of the investment decisions you’re generally inclined to make? Share with us in the comments box below!