Everyone has an investing spirit animal – they just might not know which one. Figuring out which animal describes you best allows you to quickly summarize your investing style and determine your mindset towards investing. This helps to determine how to best plan for your future. There are two main factors that determine your investing spirit animal: risk tolerance and researching style.
What’s Your Risk Tolerance?
The underlying factor that plays the largest role in determining one’s investing spirit animal is risk tolerance. For simplicity’s sake, we’ll illustrate this with a few examples of three levels of risk tolerance – low, medium, and high. People with low-risk tolerance essentially put their money where they can get a safe, steady return – money market accounts, savings accounts, and certificates of deposit. People with medium risk tolerance tend to place their money in the stock market, but only in places like established, “blue-chip” companies or huge mutual funds that balance stock and bond holdings. Lastly, those with high-risk tolerance don’t focus on short term volatility but instead pursue long term goals. They often place their money in a variety of higher-risk investments.
Risk Tolerance and Age
One of the most important factors in determining your risk tolerance is your age. Investing early and often plays a huge role in contributing to your retirement. Younger investors generally have decades to go before they need to draw from their accumulated earnings and as a result, can often take on a significantly higher amount of risk. People relying on retirement income, however, are less likely to invest too heavily in higher-risk vehicles, as a large drop in the market could have drastic consequences.
Deer – Risk Averse
There are so many of them. You can find deer across the street, behind your garage, in front of you on the road, basically everywhere except the desert. The vast quantities of deer mirror the number of low-risk investors in the country. Many Americans, to some degree, are low-risk investors. Everyone has a savings account, millions of people utilize CDs and investors have been flocking to lower-risk bond funds for years. If you keep the majority of your investments in these vehicles, then your investing spirit animal is most likely a deer. Thoughts about the next market crash understandably haunt your thoughts and keep you awake at night. Many things terrify deer, except of course drivers minding their own business. But they mostly run away from nearly anything that might pose a threat.
Honey Badger – Risk Lovers
There are few animals on earth quite as difficult to damage as the honey badger. These aptly named creatures plunge into nests of bees and endure hundreds of stings while joyfully feasting on the available honey. Barely anything stops them from achieving their goals, and setbacks lead to quick recoveries. For example, these remarkable animals rapidly recover from venomous snake bites. Sure, it’ll knock them unconscious for a few minutes, but after that, they get up and look around for another beehive to terrorize.
If you’re a bit of a maverick when it comes to investing, you are truly a honey badger. Hardly anything scares you. The stock market could enter a recession half as bad as the Great Recession, but you won’t be one of the many investors who panic and start selling their assets. You’ll patiently wait out the storm and probably even invest more money as the market retreats. The Honey Badger’s spirit matches fairly young investors who have plenty of time to experiment before they retire.
Octopus – Risk Cautious
This marine organism proceeds cautiously and methodically, avoiding risks but aggressively pursuing its goals. Octopi are able to open jars to reach the fish inside and squeeze into incredibly small spaces in order to explore new territory. However, if they, for example, come across a gap too narrow for them, they will make a judgment call and back off. Curiously, they often tackle their adversaries head-on.
There is a video on Youtube of an octopus vs. eagle wrestling match and it is a shining example of everything an octopus investor stands for. Despite the fact that the octopus had probably never interacted with an eagle before, it quickly ensnared the eagle and was about to eat it before rescuers saved the eagle and recorded the altercation. Similarly, investors with an average degree of risk tolerance roll with the punches while simultaneously avoiding situations too risky to merit involvement. If you fit that description, your investing spirit is an octopus. The octopus spirit animal corresponds to middle-aged investors who have the ability to take on risk, but also need to invest in low-risk options, too, as they get closer to retirement.
Cat vs Dog Researchers
Investing is about way more than just a person’s risk tolerance. Researching and doing some homework are also very important factors. No matter which of the above animals best fits your style, you could describe yourself as either a dog or a cat researcher. This refers to the amount of time you spend researching various options before allocating your funds. Cats show little interest in most things. They ignore the expensive toys you buy them but jump around in excitement when presented with a plastic bag. You’re more of a cat researcher if researching generally bores you. You feel like it’s unavoidable and you would rather just get it over with. Most of the time, you prefer to sit back, relax and let your investments grow passively.
Dogs, on the other hand, become fascinated by anything. They thrive when they experience repetition. It doesn’t matter how many times they take walks – dogs will always want another one. Even though it might hurt their bellies, they will do limitless amounts of tricks for even more treats. If you don’t mind repetitive processes, you have a dog style towards researching investment opportunities.
Let’s Find Your Investing Spirit Animal
While it’s possible that you fit neatly into one of the above categories, every investor is different, and as such, requires individual advice. Once your ‘Demand Social’ portfolio is open and funded, you will receive an email letting you know your investing spirit animal. Need a little help getting started? Schedule a video conference with a Demand Wealth advisor today.
This report is a publication of Demand Wealth. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.