I am looking at the psychology behind investing. One of the key preparations is to understand the strengths and weaknesses of our own personalities.
I have added known investors who are known (or suspected) of a certain personality profile. I spend them studying some of them (in my case, Peter Lynch) so that I can build on my strengths and be mindful of my own pitfalls. I have been reading his materials and transcribing his videos.
I have gotten Grok to compile the following:
Tips on using MBTI personality profiles for our investing journey:
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Know your personality profile. Consider doing the free MBTI personality profile here. Know that the personality profile is a guide, as we behave differently under different circumstances.
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Set your investing goals (Please refer to the next segment for details).
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Understand and be aware of the strengths and weaknesses that we have.
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Set a time horizon. Do you have immediate or mid-term needs that require funds, like a marriage?
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Understand the risk-reward tolerance.
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Consider taking courses or lessons to understand the investing instruments.
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Consider joining investing communities to learn, connect and share.
Investing Goals Checklist
Typical investing goals include growth for long-term wealth accumulation, income for regular cash flow, and capital preservation to protect the principal. Common specific objectives often depend on a person’s life stage and include saving for short-term goals like a down payment or vacation, as well as long-term goals such as retirement or a child’s education.
By objective
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Growth: Increasing the value of your investment over time, often for long-term goals like retirement.
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Income: Generating regular payments through dividends or interest to create cash flow.
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Capital Preservation: Protecting the initial investment from loss, often through more conservative strategies like fixed-income securities.
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Liquidity: Ensuring you can access your money quickly when needed, which is important for short-term goals.
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Tax Savings: Using investments to reduce your tax burden.
By time horizon and life stage
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Short-Term (1-3 years): Saving for a vacation, a car, a down payment on a house, or a wedding.
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Mid-Term (3-10 years): Paying off student loans, saving for a home down payment, or funding professional development.
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Long-Term (10+ years):
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Retirement: This is one of the most common long-term goals.
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Children’s Education: Saving for college expenses.
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Wealth Accumulation: Building overall wealth for financial independence or legacy building.
By the goal-setting stage
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20s: Build an emergency fund, pay down high-interest debt, and start long-term investing.
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30s: Save for a home down payment, plan for children’s education costs, and identify other high-cost, short-term goals.
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40s and 50s: Begin serious retirement planning and consider your desired retirement income.
Conclusion
There is no shortcut to success. Let research be our due diligence. Coming to the investing time horizon, I do not agree with what Grok has compiled, as I think that there is money to be made in varying time horizons. Personally, I prefer my investing to be long-term (10 years and more). Yet, it is important to be aware of our tendencies so that we can build on our strengths and avoid our weaknesses with strategies, systems and communities.
I wish all of us success in this investing journey that we share.
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