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Just as the drawbacks and shortcomings of passive investors who rely upon the judgment of market veterans led by ignorance of investing mechanics and typical jargon used in investing gave birth to the bargain investors who were focussed to gauge suitable investment avenues as per their preference to attain financial freedom. The inability to provide instant returns to impatient investors gave birth to the kind of daily pips catcher.
There is nothing more critical in this world than being an investor, who is responsible for gauging investment opportunities with the obligation of safeguarding themselves from rising inflation in the global and Asian economies and other external factors that could dampen the expected returns from financial markets. Moreover, the array of opinions provided by finance wizard pundits keep the investor indecisive.
However, it’s not the returns generated by the surplus funds from channelising into investment avenues dictate the kind of investor you are, but the goals of financial requirements that keep you going. No doubt, the path of investing in financial markets is getting more complicated.
After an in-depth search and discussion with advocates of financial planners, we have observed four kinds of investors:
Relying upon a regular income generated by various asset classes that sustain the risk-averse nature of the investor, keeping in mind, regular income is enough to earn the opportunity cost of leaving the current purchasing power, risk-free interest on securities and risk premium.
The active investor is known for making his own decision by scrutinising long-term financial health, stability and future projections of various asset classes to determine optimum allocation of funds and maximise returns.
No doubt, the attainment of financial freedom in the early stage of life is getting hashtags and people are attributing regular trading in the financial markets a catalyst to attain that goal. These kinds of investors are getting the limelight these days as it could help them keep their returns intact. However, the big returns carry high-risk exposure.
The evolution of artificial intelligence and high-frequency trading in financial markets that has brought the tech-background market participants into trading arena are the ‘Early Adopters’ of the new mechanics. These kinds of investors are getting higher popularity and changing the culture of trading in financial markets.
However, the underlying goals of the investors serve as a major catalyst to find the right kind of investor inside you:
Even though the regular returns are getting limelight led by rising number of impatient investors, the goal of long-term financial building can never go out of fashion. No matter how old you are, or what kind of investor class you belong to, you will always get lured to capital appreciation. Majorly, the active traders get more attracted to invest for long term goals.
No doubt, the investors are advancing towards mouth-watering returns in no time but the risk-averse group of investors and those who are planning for retirement are satisfied with earning a decent recurring income. Passive Investors usually invest in securities that are able to provide risk-less returns generated by gilt-edge securities in addition to risk premium that is associated with the assets.
As short-term and intra-day trading is gaining popularity, the evolution of technology in programming and artificial intelligence are keeping the execution of truncations on an auto-pilot mode. Daily index beholders and fintech traders are using algorithms and systems to work on them.
The author is the CEO of invest19