Types Of Investor : which one u ??

Different types of investors:

1. Yahoo type: Yahoo is making new lows almost every day. But why some investors are still buying this stock. These investors are high risk takers. Their opinion is “Yahoo is a strong acquisition target” and Microsoft will buy it within one year at above $25 per share and we will 100% returns. What will happen if Microsoft will not buy Yahoo? They will lose heavily. Small banks will fall under this category.

2. Microsoft type: Microsoft lost just 15% in this market mayhem. Value investors buy stocks like Microsoft, Coca-Cola and Wal-Mart. Because Microsoft has huge cash flows, reasonable visible earnings and good track record. Its reasonable valuations and buyback offer are other attractions.Bharti Airtel and Hero Honda etc. will fall under this category.

3. Google type: Google shares lost 60% of value despite good growth prospects due to high valuations. Growth stocks fall heavily on bear markets and gain heavily in bull markets.Glenmark and Punj Loyd etc. come under this category. Fall is more and recovery will also be high in these scrips.

Who is wrong among the above 3 types of investors? If you analyse their minds, everyone is right in their perspective. It depends on your risk profile, your patience levels, investment principles and greed-fear levels.

Psychology of the Stock Market investors:

1. Yahoo Investors: High risk takers (greed but no fear)

2. Microsoft investors: Value investors (less greedy-more fearful)

3. Google investors: Growth investors (greedier-less fearful).

4. Visionaries: Patient investors. They buy stocks when no one think about that sector or stock and forget about it for 4-5 years. These investors generally get exceptional returns but how many of us have such patience levels. Motilal Oswal bought Bharti Airtel at Rs 25 and legendary investors bought Sesa Goa in 1991 and Infosys in 1997. That’s the vision.

5. Contra investors: These are ultimate investors. One needs to have extreme guts to become a contra investor. Legendary Investor John Templeton invested in Japanese stocks when Japan is reeling under severe financial crisis. Japan took 11 years to recover from that crisis. Templeton waited patiently and got wonderful returns in 1981. How many of us have such vision, guts and patience?

My advice: One should choose their investment styles according to your needs and psychology. It is better to have all kinds of stocks in your portfolio.

Final advice: Frankly to tell that no one in the world knows about the severity and depth of current credit crisis and its implications on the economy. If you are a long term investor with two year horizon but don't have money, just forget about your investments. If you have money, gradually deploy the money in good stocks to build a great portfolio. Closely follow the quarterly results to find great stocks. It is waste to track your investments on daily basis in these painful days. Those who show vision and strong resolve will be rewarded but take time. Instead of developing knowledge and learning from mistakes, you continue to rely on tips- you will continue to lose money in stock markets.