Why does your personality style so important to define your investment style?
Many of us have gone through the process of searching for an investing or trading methodology that can make us a lot of money, such as value investing, momentum investing, day trading, trend following trading, and trend reversal trading. We read books, articles, and posts on forums, and talk to friends. Some of us even sign up for different investment and trading courses in the hope of finding the ultimate method. During our search and learning, different people will promote different methods to us.
For example, one group will provide a wealth of evidence to support the effectiveness of value investing, citing Warren Buffett as an example of its success. They emphasize the power of compounding and the importance of focusing on business value rather than price. Another group will stress the importance of technical analysis and the potential profits to be made by riding trends. Yet another group will argue that both fundamental and technical analysis have their own strengths and that combining them is the best approach.
The situation can be likened to the Star Wars movies, where, as a new Jedi, you must decide between the light side and the dark side. However, things can get complicated. After going through the search, you may decide to follow a certain method, such as fundamental analysis, and adopt a long-term perspective. But then, an article or another “guru” may appear and present impressive results that make you question your decision.
I believe that most of the people you encounter on your journey have good intentions and are trying to help you. It is also beneficial for you to explore different investment methods and understand the differences between them. It’s important not to become too obsessed with debates about which method is superior or inferior. There is no award or recognition for determining that, and ultimately, it’s not for anyone to judge. It’s important to learn from different perspectives and find what works best for you.
After exploring different investment styles, it’s important to take a step back and consider a crucial component that is often overlooked: self-awareness. Different investment styles serve different purposes, and some people may be more successful with value investing, while others may excel at intraday trading or momentum trading. And although not backed by empirical research, the reason an investment style works well for an individual is because it aligns with their personality. It doesn’t have to be a perfect match, but rather a close fit of around 80-90%. When an individual’s personality aligns with their investment style, they can adapt and adjust their mindset more easily.
Instead of trying to change your personality to fit an investment style, it’s important to choose one that aligns with your own personality. By being self-aware, you can identify which investment style best fits you and adjust your mindset accordingly.
Here, my intention is to give you some ideas to stimulate your thoughts.
Two fundamental components in successful entrepreneurship are health and self-awareness.Gary Vaynerchuk
If I may, I modified Gary’s quote to “Two fundamental components in successful investment are health and self-awareness.“
- Health – Health is crucial as it can impact one’s focus, judgment, and patience. You may consult a nutritionist, dietitian, weight loss specialist, and doctor for good diet and exercise. Self-awareness is about your ability to know your own personality, style, interests, biases, and feelings.
- Self-awareness – Without self-awareness, you may be constantly struggling, basing your decisions on what others think or what is “cool” rather than what aligns with your own personality. The journey to self-awareness is about being honest with yourself even when no one else is watching.
To assist you self-aware your own personality and style, I share a personality style test where the survey is based on personality topology introduced by Carl Jung: Thinker, Feeler, Intuitor and Sensor.