How Investing Personality Types Frame Your Money Perspective – Portfolio Charts (2024)

It’s interesting how the simplest question can sometimes cut straight to a complex reality that is deceptively difficult to explain. For example, I recently received a nice email from a new Portfolio Charts visitor that went something like this:

“I’m new to stocks, kind of. I know crypto decently. I’d love to know in layman’s terms what this site is about exactly? To buy stocks that are historically low and going to go back to its high someday?”

While that may seem like a softball on the surface, the thing that tripped me up is the phrasing. I recognize that the reference to buying stocks low is an important social cue that provides insight into the investing mindset of the writer. And I know from experience that it’s not good enough to reply with just any boilerplate summary, as presenting new information in terms people can relate to is critical to effective communication.

So we’ll need to go deeper. How deep? Lean back, relax, and let’s talk about the concept of investing personality types.

Table of Contents

• Thinking About Thinking About Investing
• The 8 Fundamental Investing Mindsets
• Determining Your Own Investing Mindsets
• Understanding Investing Personality Types
• Thinking Outside Your Box
• Takeaways

Thinking About Thinking About Investing

Like the way that two people with different eyeglass prescriptions or tints can look at the exact same scene and see different things, investing is often a matter of perspective. Your portfolio paradigm matters, and the mental framework through which you process the financial world around you has a large effect on how you understand investing. What makes perfect sense to one person may be completely incomprehensible to another.

Which got me thinking — in my many years of sharing thoughts on investing, what are all of the different types of investors I’ve come across? And where does Portfolio Charts fit into the picture? No matter if you’re new to the site and want to understand the approach or a long-time fan and want to learn how to relate to others, I believe answering those questions can help you better connect with the wider financial world.

A quick search for investing personality types returned a handful of notable results. The most prominent is the CFA Institute’s Candidate Body of Knowledge categorizing the four main types by their willingness to take risk — cautious, methodical, spontaneous, and individualist. There’s also this paper on Personality Differences and Investment Decision Making that groups investors by openness, conscientiousness, extraversion, agreeableness, and neuroticism. I’m sure both are well-researched, but they feel a little high-level for my tastes with a heavy emphasis on clinical psychology rather than nuanced investing mindsets beyond simple risk aversion.

Some other articles venture into a topic that I think has merit — Myers-Briggs personality types. The basic idea is that by evaluating things like introversion vs. extroversion and thinking vs. feeling, it’s possible to isolate one of 16 distinct personality types for any person. Sometimes the overviews can admittedly read like astrology, but the insights do have measurable legs. INTJs really are predisposed to careers like engineering, while ISFPs tend to make better caretakers. I have yet to read a Myers-Briggs framework for investing that I find particularly compelling, as the two topics tend to feel a little wedged together. But I do like the thought process.

So in the spirit of Myers-Briggs but with a specific focus on understanding investors, I took a stab at my own framework that I think best describes the many types of investing approaches I’ve come across. It’s not scientific by any means, and I’m totally open to revising it over time. But it’s a good start.

I straightforwardly call it the investing personality type, and it’s based on 8 unique investing mindsets.

The 8 Fundamental Investing Mindsets

There are all types of people in the world. While it’s impossible to describe every possible perspective with absolute precision, after speaking about investing with way more than your average number of people I’ve noticed a few general patterns. Based on my own experience, I believe the vast majority of educated investors typically fall into a combination of the following 8 mindsets in 2 categories.

We’ll get to what all of those things mean in a moment, but the short story is that most investors can be described as a mix of motivation and method. Maybe you’re an Impact Gatherer or a Theory Trader. While have my own personal nature just like every investor, I believe all of those mindsets have merit. And by understanding how they intersect, I think we can bridge some of the investing gaps that often feel strangely cavernous between equally intelligent investors.

So to help explain my perspective and connect Portfolio Charts to your own investing lens, I’m going to do my best to accurately describe each mindset in a balanced manner.

• Overview — A basic description of the investing thought process.

• Appeal — Why its proponents find it attractive.

• Blind Spots — Things that people with this mindset often neglect.

• Examples — How to know if you’re this type of investor.

After we’ve laid the groundwork, I’ll combine the two categories into a full personality grid that helps explain many different investing approaches. Not only will you be able to find your own investing personality type, but my hope is that you’ll also learn how to relate to others as well.

Motivation

What most influences your investing choices

Theory

Theory investors accumulate the best academic knowledge to understand how markets work and to predict the ideal investments for current times.

Appeal: Theory investors are highly intelligent and use the best academic research to build a smart forward-looking portfolio suitable for the task. Studying the work of the most renowned names in the field gives them confidence in the plan, and they find that it’s much easier to stick with a strategy when they have a strong understanding of how it works.

Blind Spots: If they’re not careful, theory investors can fall victim to poor assumptions and incomplete models that render their favorite studies and formulas useless for their own situation. They can be susceptible to credential bias when evaluating new ideas. And they can sometimes become dismissive when data doesn’t match their favorite theory.

Examples: If you read academic papers about deep value investing, obsess about forward-looking expected returns, have ever built a bond ladder to match income to liabilities, or are attracted to things like options trading, then you’re probably a theory investor.

Proof

Proof investors study financial history to seek real-world evidence of how portfolio concepts measurably performed. They make decisions based on clear assumptions and good data.

Appeal: When deciding between multiple options, proof investors believe evidence makes the choice much easier. Understanding a variety of different performance metrics helps them confidently match investments to their needs. And by knowing what other investors also experienced, proof investors see current performance in full historical context.

Blind Spots: Without the proper backtesting approach, proof investors can easily fall prey to curve fitting and cherry picking that lead to shortsighted conclusions. Data availability bias can skew research by ignoring other good options in favor of easy data. And a lack of understanding of theory and context can sometimes lead to poor data interpretations.

Examples: If you sort investment options by the top performers, like documented lists of dividend aristocrats, enjoy backtesting portfolio concepts, or search for trading signals in market histories, then you’re probably a proof investor.

Trust

Trust investors tend to seek external validation from others. They understand their own limitations, truly admire an investing icon, or prefer to act in packs rather than on their own.

Appeal: Investing based on trust removes a lot of personal pressure. Trust investors let the market (or market expert) do the work, and by crowdsourcing expertise they lean on the collective knowledge of many people. Even when times are tough, they rest assured that they’re in the same boat as others and that someone is keeping an eye on things.

Blind Spots: Trust investors can sometimes be prone to hero worship, and when they feel let down it can be painful. Those who place trust in crowds can be targeted by marketing groups or influenced by fads. And those who idolize external voices too heavily sometimes use that as an excuse to defer responsibility for their own choices.

Examples: If you act on stock tips from friends, select a fund based on the manager you admire, like the idea of human or robo-advisors making good decisions, or follow the recommendations of a newsletter, then you’re probably a trust investor.

Impact

Impact investors want not only to make money but also to make a difference. Some invest in companies they want to succeed while others use their money to reform society.

Appeal: Impact investors believe that life is about more than just maximizing profits, and by using their savings to also make the world a better place then they accomplish two goals in one. Impact investing also makes it easier to ride out the tough years, as even when their portfolio is down they feel good knowing that their efforts make a difference.

Blind Spots: Because they have big hearts, impact investors can be easily targeted for emotional manipulation. Speaking in pious terms can turn off neutral investors. And being picky about where they invest also carries a cost, as some causes could be better served by putting profits to good use rather than by avoiding profitable companies on a black list.

Examples: If you are a strong supporter of the ESG movement, buy stock in the maker of your favorite products, set up an endowment for your favorite cause, or were drawn to short squeezing the GameStop hedge funds on principle, then you’re probably an impact investor.

Method

How you best understand investing

Hunter

Hunters picture investing as the process of targeting winners and eliminating losers while actively making profitable choices. Their eyes are always open for new opportunities.

Appeal: The hunter mindset is the oldest in both survival and investing — you keep what you kill. Skilled hunters can quickly accumulate wealth, and training improves their abilities over time. By identifying good deals and avoiding bad ones, hunters take pride in the investing alpha that they personally produce.

Blind Spots: Even if they’re very good at research and stock picking, maintaining it for decades can be very stressful and time consuming. If they don’t properly manage risk, one poor decision can wipe out years of good ones. The most famous investing hunters often benefit from survivorship bias where nobody talks about difficulty or failures.

Examples: If you enjoy reading company reports, watch the financial news daily, talk about hot new investments with friends, or often switch stocks or funds to better options that you believe will outperform in the current environment, then you’re probably a hunter.

Gatherer

Gatherers prioritize steady income via dividends and interest to fund the cash flow needs of their everyday life. They are open to new sources of income, but value dependability.

Appeal: Matching income to spending is a responsible practice that all good savers are taught when learning to budget. By applying the same mindset to investing, gatherers manage overall cash flows while minimizing risk. It’s a common retirement mindset, as replacing work income with investing income is the simplest way to cover expenses.

Blind Spots: By focusing heavily on the fruit of dividends and interest, gatherers miss out on the nutritional value of the trees — capital appreciation. That makes them particularly conservative, leading them to over-save for goals. Investing in things with high dividends and interest can be less tax efficient than options that focus on total returns.

Examples: If you first look at the yield of a bond, prefer funds that prioritize dividends and interest, like the idea of steady rent or loan income, or are particularly attracted to annuities, endowments, and withdrawal rates, then you’re probably a gatherer.

Farmer

Farmers invest in diverse allocations and dutifully tend to their assets to meet the needs of their families. They rebalance when needed and add or remove assets only when necessary.

Appeal: Farmers recognize that managing a portfolio of a handful of different assets is a simple way to grow and protect money with minimum stress, cost, and risk. When complementary assets are chosen to work well in different seasons, farmers sleep well knowing that they’ll be just fine no matter what happens in the markets.

Blind Spots: While they value buy & hold strategies, growing farmers sometimes get caught in an endless optimization loop of continuous portfolio change that is not actually passive. On the other hand, dedicated farmers can also fall into a cult mantra of idolizing one strategy while reflexively rejecting evidence of better ideas.

Examples: If you believe in ignoring the noise and accepting what the markets provide, think in terms of blended portfolios rather than individual assets, or seek out comparative portfolio metrics to find the right balance for your needs, then you’re probably a farmer.

Trader

Traders are high-level tacticians that think in terms of profitable systems rather than valuable securities. They create their own opportunities rather than wait on the markets.

Appeal: Even a great investment can go a very long time before it finally pays off, but tacticians find opportunities where others only see frustration. While they are opportunistic like hunters, skilled traders use intelligent strategies like volatility, options, shorts, and momentum to generate sizable profits even in poor market environments.

Blind Spots: A successful trading system can be highly intoxicating, and traders are often tempted to ramp up a working strategy while ignoring effort boundaries and risks like margin calls. As a result, they are prone to overconfidence right up to the moment where they either lose big or burn out and must start over with a new tactic.

Examples: If you monitor strategies from investing newsletters, think more about signals and algorithms than asset valuation, or are attracted to investing approaches like managed futures, options, or dual momentum, then you’re probably a trader.

Determining Your Own Investing Mindsets

As I mentioned earlier, most investors are best described as a combination of a motivation and a method. After reading the descriptions, some of you may recognize that your own mindsets are obvious while others are a little torn. So let’s pause for a moment to clear a few things up.

The goal of the exercise is not to evaluate what you want to be in the future, but who you are today. And there’s absolutely nothing wrong with any of the choices! So don’t twist it into a self-image thing or a pride point. By being honest with yourself about how you think about investing, you’ll break down barriers to future growth.

Also, it’s normal for individuals to dip their toes into multiple waters. But there is usually one dominant investing personality type. So when evaluating your investing motivation, think about what most influences your decisions. And when evaluating your investing method, think about how you best understand investing. When in doubt, a good process is to imagine a situation where two things might be in conflict.

For example, are you a theorist who studies economic models and who also references historical backtests? When the proof does not fully support the theory, which one do you fall back on and which one do you question? If you start by quoting research and questioning the data, you’re a theory investor. And if you start by searching for the hole in the model, you’re a proof investor.

Or are you a stock hunter with a trader mindset for capitalizing on investing opportunities? Think about a situation where your strategy demands that you sell a stock you personally know a lot about and particularly like. If you hold your find with diamond hands while tweaking the strategy, you’re a hunter. And if you dump it without a second thought because the strategy is what matters most, then you’re a trader.

So before reading on, take a moment to re-read the options and settle on a motivation and method baseline. It will make the step to come that much more productive.

Understanding Investing Personality Types

Once you’ve internalized the concept of unique investing mindsets, the real action is in the intersection of motivation and method. Placing them into a grid, you get 16 possible investing personality types. Here’s what that looks like in layout form. Blue is motivation, red is method, and the white squares represent the types of things that each investing personality is particularly attracted to.

For a quick walkthrough of how to use the chart, let’s say you’re a Trust Hunter (a very common type for social investors). Reading the descriptions, that means that you “Seek external validation to actively stalk good investments”. Where those mindsets intersect, it indicates that you probably find a lot of value in talking about stock tips with friends. I bet that sounds pretty familiar.

Obviously the personality interests are not all-inclusive. However, the mindsets are universal. So the same framework can also be applied to activities not explicitly on the list.

For example, think about real estate investors. Buyers who seek undervalued homes are hunters. Landlords who use rental properties to produce steady income are gatherers. REIT investors are farmers. Opportunistic house-flippers are traders. And all four methods may have different motivations like prioritizing maximum theoretical profit in a flip or renting to low-income people in need.

Also, I have no doubt that strong believers in a particular investing style may object to some of my simplified characterizations. But even if you think I miss the mark, my hope is that you’ll appreciate the spirit of the effort and perhaps learn something new about how others approach the same problems.

To that end, once you find your own type I think it’s helpful to next use the chart to see how other investors think.

Thinking Outside Your Box

When it comes to communication, the important takeaway is that the ease of understanding other investing personalities depends on where they lie on the grid relative to your own.

For the most part, you’ll get along with people of the exact same personality with no problems. And speaking to other investors is usually not too tricky within your same row or column. That’s because even if you disagree on some things, you still have either a method or a motivation in common.

To show how that works, let’s start with my own investing personality type. While I take pride in keeping an open mind and speaking to all types of ideas, I think it’s safe to say that most people would agree I’m primarily a Proof Farmer.

Judging by my interest in charting historical data and articles like this one on efficient portfolio design, the “backtesting portfolios” activity certainly fits. And it wouldn’t surprise me if many of the biggest fans of the site share the same investing personality type. But I can also relate pretty well with the mindsets of other proof investors or farmers. If you’re looking for proof to support your preferred method or a farming solution to your favorite motivation, I’ve got you covered. Even if I can’t perfectly speak to each option, we’re usually at least on the same page.

Now that’s not to say that there’s never conflict. Motivations in particular are based on core psychological traits that can trigger strong emotions. Theory and proof investors often find themselves at odds because of the natural tension between theory and reality. Trust and impact investors sometimes fight over fund objectives. And inward-focused theory and proof investors can seem arrogant and out of touch to outward-focused trust and impact investors. But even with those natural differences in motivations, when you share a method you can at least talk about the same general investing approach.

Where it gets a little tricker is when you’re tasked to talk about investing with someone diagonal to your own personality. Because you don’t share a common mindset, sometimes it can feel like you’re talking past each other. It’s not that one of you is smart and the other is dense. It’s just an issue with two completely different personality types seeing the same information and reacting in fundamentally different ways.

That doesn’t mean communication is impossible, though. For example, with a little work I can explain perpetual withdrawal rates to Impact Gatherers who want to create an endowment for their cause. And I can also learn from Theory Hunters about how valuation methods work so that I can apply them to my own farming concepts. But sometimes those conversations can be hard, and you have to keep an open mind both ways. Thinking beyond your own mental framework takes genuine effort.

And speaking of thinking outside the box, the chart can also be useful to work backwards from certain keywords to identify the investing motivations and methods of others.

So the next time you hear someone reference options trading, there’s a 90% chance they’re a Theory Trader. Talking about your favorite mutual fund may not be of much interest. And if someone shares an ESG fund that they feel strongly about, you can put money on them being an impact farmer. Lecturing them on how they should actually be liability matching TIPS to their future debt payments probably won’t make any friends.

It may not be perfect, but it’s a nice way to think outside of your own bubble and appreciate alternative mindsets. Everyone is different!

Takeaways

Like learning about Myers-Briggs personality types for the first time, understanding the concept of investing personality types can take a while. So to help with that process, here’s a quick summary of my basic theory:

• Investors can generally be sorted by their primary affinity to 8 mindsets based on what most influences their choices and how they best understand investing.

• Combining a motivation with a method, one can establish 16 distinct investing personality types that describe how people view the financial world.

• Communicating with other investors who share the same motivation or method is easier than communicating with those who have no common mindset.

• Specific interests associated with each personality type can be used to help identify the unique investing motivations and methods of others.

So find your own investing personality type and think about how your type influences how you think about investing. Look at the motivation and method, and consider how you might speak to people with those parallel mindsets. And think diagonally to different types of investors to imagine what you might learn if you walked in their shoes.

To put this concept into practice, let’s circle back to the reader question that started it all.

“I’m new to stocks, kind of. I know crypto decently. I’d love to know in layman’s terms what this site is about exactly? To buy stocks that are historically low and going to go back to its high someday?”

A version of me living solely within my own bubble could simply say that the site is about backtesting portfolios. Not only is that awfully reductive, but by ignoring certain social cues it also misses a big opportunity to actually reach a different type of investor. After fleshing out my understanding of investing personality types and reading the question carefully, I think I’d answer something like this:

“Portfolio Charts talks about lots of investing topics including portfolio theory, data analysis, and psychology. But at its core, it studies practical evidence to manage an allocation to multiple assets. That’s a little different from hunting individual stocks, as my method is more like a low-key farming approach of tending to balanced fields of many things suitable for different economic climates. Many of the themes are universal, though, and if you can tell me a little more about how you go about picking the stocks or cryptocurrency to buy then I’d be happy to point you to a few articles that explain things in terms you may appreciate.”

See the difference? Communication is so much more effective when you speak to the unique mindsets of others.

Depending on where you land on the personality grid, how would you approach a similar question in order to best communicate your own perspective to someone who may think about investing very differently?

Answer that, and you’ll have experienced the most impactful part of the exercise. By unpacking how you think about investing, you can not only understand others but also learn something about yourself.

What investing personality type are you?