A. Michael Lipper divides the investors he has come across into 10 types. The last three may not be the typical prudent investors that often come to one’s mind. In fact, they look to be the antithesis of the financially sound mind which sets out to achieve the most profit for itself.
The Guilty Investor
It may be hard to believe, but Lipper has known investors who seem to be determined to lose their wealth by investing. They act as if they harbour some kind of unnamed guilt for the wealth they have amassed and, rather than simply giving it away, engage in a series of bad investments (junk bonds, volatile stocks or other highly speculative schemes) so that continuous and steady losses result.
The Financial Death-wish Investor
This type is even more mystifying. People in this category are usually successful in their own fields and generally got their wealth from highly lucrative expertise or patented products. They have studied and know everything in their areas of expertise and are usually trendsetters or trailblazers. But when it comes to investing their own money, the same level of intensity and prudence is nowhere to be found. They show no interest in knowing about the capital market or developing a strategy to preserve or enhance their assets, and often engage in high-risk investments that result in progressive losses, hence fulfilling their ‘death-wish’.
The Paralytic Investor
The last type barely qualifies for the name ‘investor’, for they do very little investing, often out of neglect or laziness or both. They sit on their savings, inheritance or fund and are unwilling to make any decision (which is itself a decision) as regards how to grow it. Bank deposit is the only means they know. In this era of nil or negative interest rates, these investors are truly ‘paralytic’.
From the most aggressive high-stake gambler to the introvert paralytic, Lipper has painted a much caricatured but nonetheless candid picture of the museum of investors.
This article was originally published in No. 489/490, Newsletter in Dec 2016.