THERE are many different types of investors. Here are 10. Maybe you can spot yourself.

Many types make up the world of share trading
June 26, 2010

THERE are many different types of investors. Here are 10. Maybe you can spot yourself.

The Plodder This is your goody two-shoes investor. Holds a portfolio of long-term stocks. Out of 20 stocks bought for $50,000 each, all are worth $60,000 except for Telstra ($30,000) and the banks ($100,000 each). Carved out of the annals of financial theory. Focuses on franking. Quotes Warren Buffet.

Banks are 40 per cent of the portfolio because he got them in the float and never sold them. Never trades. Never sells. Is appropriately inattentive. Wishes he'd sold Telstra.

The fear of losing money to the Tax Office through capital gains has driven spectacular long-term annual compound returns and ensured an absolute belting in the global financial crisis.

But it doesn't matter because everything was bought for 10¢. Will leave millions to his undeserving children, who will cash it all in and live like kings.

The Gambler Thinks the sharemarket is everything the product marketers say it is and is quickly skinned alive in some derivative product he didn't understand.

The 10-Bet Investor Has 20 stocks bought for $50,000 each. Two stocks have gone to zero. Sixteen are worth between $45,000 and $55,000. One stock is worth $200,000. One stock is worth $2 million. Focus on resources exploration, biotechs and new issues. No banks. No big blue chips. No yield. This is organised gambling where the odds are narrowed by a lot of work, information and networking.

The "Blind and in Love" Investor Has $1 million and it is all in one stock. Next year it will be worth anything between zero and $10 million. This is the investor who knows absolutely everything about a stock of which you've never heard.

Is in the top 20 shareholders. The first holding cost less than a cent. Loses more than your mortgage on a 1¢ move and it moves 2¢ a day.

Doesn't sell on the spikes. Doesn't sell on the troughs. This is long-term, high-risk investment, but they know all the risks. Talks about the stock, and is very rich, or very poor. They ring you up when they're 60 either to (a) borrow money or (b) invite you to join them in the Bahamas.

The Day Trader If he has $1000 he has one stock worth $100,000, but he has to sell by the end of the day. Pays the average salary in dealing costs every year. High attrition rate. Only the devoted survive.

The Income Investor Through necessity or tradition is investing in equities for income. Made huge losses in the financial crisis having never sold "as long as they still pay the dividend". Has now learnt that $1 of income is exactly the same as $1 of capital, especially when it is a capital loss.

Hates the volatility. Wishes things would "just go back to the way they were". Is now thinking that 5 per cent in bonds isn't bad just so long as you can sleep at night.

The Value Investor Makes long-term declarations about stocks based on historic information and grand assumptions. Can explain everything but cannot trade and is useless at timing. Needs 50 years to prove he is right. Usually is.

The Lone Ranger An amateur trader who has given up his day job to trade the sharemarket. Will survive until he runs out of money or wakes up to the fact that trying to make $1000 a day out of necessity, even if successful, is a difficult, tough, demanding, soulless and ultimately boring existence.

The One-Stock Trader Has worked out that diversification is for people who don't know what they're doing and a lot more risky that trading one stock again and again and again. Does it quite well. Is vulnerable to once-in-a-lifetime events that seem to happen once a year.

The ETF Trader After many years trying to trade stocks has finally realised that his nirvana is trading the market through an index ETF. No need to read any research about stocks. No need to read 99 per cent of the business section.

All that matters is timing the market, which he does through vigilance and a combination of technical and fundamental "feel". He is relaxed. Has realistic expectations and trades just five times a year.

Who did I miss?

Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today. For a free trial of the Marcus Today newsletter please go to marcustoday.com.au

Source: The Age