Understand What Type of Investor You Are

Understand What Type of Investor You Are

Achieving investment success can be aided by understanding your own individual thesis. This page helps you determine your investment criteria.
Updated: Jan 24, 2022
0/5 Star rating
3 min read

Understanding what type of investor you are is crucial to working out the type of investment that will help you reach your goals. Outside forces, including inflation, market fluctuation, and the overall economic environment can also dictate investment styles.

There are three types of investors:

  • Passive/low-maintenance investor
  • Active investor
  • Hands-off investor/automatic investor

I. Passive / Low-Maintenance Investor

A passive or low-maintenance investor is one who lacks the time or desire to monitor her investments. These types of investors are unemotional about the entire investment process and tend to maintain portfolios consisting of multiple ways to spread risk.

While these investors maintain full control of their investments, they also strive to match or beat the broad market’s performance. Passive investors are fond of passive mutual funds, passive ETFs, and blue-chip stocks. While they are proactive in selecting the type of investments they want, such investors tend to be less active in balancing and maintaining their portfolios afterwards. Their investment philosophy tends to be long-term buy and hold.

II. Active Investor

Active investors are hands-on in all aspects of investments, from selecting investment plays to adjusting portfolios depending on performance. These types of investors spend hours each day watching over their investments.

An active investor is more commonly described as a ‘trader’, with an account in one or more online brokerages. Such investors follow the market on a daily basis, even if they don’t execute dozens of trades. The hands-on approach means they are emotionally invested to keep checking their portfolios frequently.

Active investors tend to go for select companies and are always ready to invest in a diversified portfolio. While maintaining full control of their investments, such investors are always striving to beat the market.

III. Hands-Off / Automatic Investor

Hands-off investors, just like passive investors, don’t have the time to watch their investments. In addition, they are not involved in the selection of investments, as they don’t believe in their ability to outperform professionals.

Automatic investors simply outsource the investment process to a team of professionals and task them with the responsibility of finding them exciting and lucrative investment opportunities. Mutual funds, ETFs, savings accounts, and managed investment accounts for a huge chunk of hands-off investors investment portfolios.

While such investors might hold dividend stocks in a bid to earn some income, most of them tend to stay clear of individual stocks that are always the subject of immense volatility. For this reason, most of them are usually focused on investment plans rather than investing in many different places.

Regardless of the type of investor you are, it is important to have a basic understanding of how capital is invested, as well as the risks and costs that come with them. 

Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

Harry Atkins
Financial Writer
Harry was a Financial Writer for Invezz, drawing on more than a decade writing, editing and managing high-profile content for blue chip companies, Harry’s considerable experience… read more.

Related courses

Choosing the right stock to invest in needs time and care; it is never something that can be done on a whim. From the type of company you are investing in and its financial status to overall market conditions and the need to mitigate risk, there are a variety…
Investing in the stock market is one of the best ways to make money and grow your wealth. Stock investing can serve as a reliable passive income stream that protects your capital against inflation. In addition, many companies share a portion of their profits with investors in the form of…
Luckily, it’s far easier to begin trading than it was in the 90s when Wall Street and big money were the only options. Get started with our introduction to stock trading. You’ll come away feeling more confident about the task ahead, while acquiring a base knowledge of all the most…