Essentially there are two types of investors – active and passive. It basically boils down to how much time you want to spend on your investments.
This type of investor often invests for the long term primarily in an RRSP, group sponsored RRSP or defined contribution plan.
They don’t want to do any research and they don’t have a brokerage account. They mainly invest in the same mutual funds that were set up at the start of the plan.
They plan to hold on to whatever they buy for a long time. They check their statements once or twice a year and trust that they will earn money over the long haul.
This group has a cursory understanding of financial markets but usually hires a profession financial advisor. This way they can focus on their main business, occupation or other interest.
They check their accounts every so often, read some financial news or watch a financial program and talk to their advisor at least once a quarter.
It is the advisor that does the investing and monitoring to ensure they reach their financial goals.
Active investors really want to get involved in investing. They are willing to spend three to ten hours (or more) a week in reviewing their portfolios, looking for new investments and doing further research.
They read financial newspapers, magazines and blogs to get ideas for possible investments that may help increase the value of their portfolios.
This group may buy and sell more often. They don’t want to leave the decision of what investments are in their portfolios to their money managers.
Active investors want to be involved, have more of an interest in money management and are willing to devote a greater amount of time to it.
This investor is likely not working full time at another job and is willing to devote a considerable amount of time to his (her) investments. They are not day traders.
They are not as likely to buy-and-hold although they will hold on to an investment they believe in. They are more likely to buy for growth and regularly take profits. These investors may derive most of their income from their investments.
It’s Your Money, You Decide
Some people want to invest in the market because they believe it’s easy to make money quickly. Their attitude changes soon enough when their money is on the line and they have to decide what to do.
Decide whether you have the time and interest to devote to your investments. You don’t want to set yourself up for failure. Don’t hand off your money to someone else and not pay attention to how that person is investing and managing it. It’s your money and you don’t want to lose it – so don’t ignore it.
What type of investor are you?