3 Types of Investors (Which One Are You?)

Transcript

Hi friends. Today I want to talk about investing a little bit, mainly because the stock market feels like this giant thing: a scoreboard, a casino, a growth engine, a battleground of predictions and very strong opinions. Depending on who you talk to, it's either the easiest way to build wealth or the fastest way to lose everything, with a lot of views somewhere in between. Why is that? Because everyone participating in this giant stock market is playing a different game.

Picture this. You walk into a gym, and the place looks the same for everyone. Same weights, same treadmills, same TVs playing yesterday's highlights. Yet one person is training for a marathon, the person next to them is trying to rehab their knee, and another is there to stay healthy enough to keep up with their kids. Same building, very different goals. If the marathon runner copies the rehab program, they're never going to finish the race. If the person rehabbing their knee tries to keep up with the guy maxing out on bench press, they might leave with a limp. Investing works the same way. We overhear advice from a neighbor, or we're scrolling through social media, and suddenly we feel behind, or we get this fear of missing out, or this confusion. We compare ourselves to people playing a completely different game: different stakes, different timelines, different goals. It's no wonder it can feel overwhelming.

So let me ask you, what game are you playing? Or are you just investing because someone told you that's what responsible adults do? When you actually understand the purpose behind the money you're investing, the market feels far less intimidating and a lot more useful. Here are three different games I see going on in the stock market.

Game one, the quest for outperformance. Trying to beat the market, swing for the fences, make more money in a short period of time. It's a legitimate game, and it can be exciting. I played it for some years. I tried day trading, options, technical trading. I was convinced that if I followed the trend lines just right, I'd unlock some secret code and make a bunch of money fast. Sometimes it worked, and those early wins felt incredible. For a moment there, I genuinely believed I was the smartest guy. Spoiler alert, I was not. I just got lucky, because then the losses eventually showed up, and those losses hurt a lot more. They brought me back down to earth real quick. Psychologists call that loss aversion, where losing money feels twice as painful as gaining that same amount feels good. Losing money just hurts. The market taught me lessons I could never learn in a classroom.

There's nothing wrong with this game. It builds humility, perspective, and a healthy respect for risk. It can be the most hands-on education money can buy. But my only caution: if you're going to play this game, do it with a small slice of your financial life, money you can afford to lose without derailing your future, whether that's 5% or 10%. Because this game is hard, really hard. And there's data that backs this up. Most people who trade actively end up making less than someone who simply buys and holds. Most of the wins you see online came from good timing, meaning they probably got lucky, not a strategy that keeps working. It's kind of like winning the lottery once, thinking you've cracked the code, and going back for more. The investors who tinker the least often do the best over time. For some, the time, the energy, and the emotional roller coaster just aren't worth the return, if there even is one. In investing, doing more usually leads to worse results, which is kind of weird. There aren't many things in life where that's the case.

So our instincts kick in. If our portfolio is down and we see red, we think something is broken and we should fix it. If the market's going up, we want to jump in. If it's going down, we want to get out, because it doesn't feel good. But history shows that reacting to short-term performance usually leads to buying high and selling low, the exact opposite of how wealth is built. So game one is great for learning a lot about the stock market, but it's probably not the best for building long-term wealth.

Game two, the accidental investor. This is where most people actually live. They invest because they know they should. They've heard compounding is powerful, and they know retirement isn't going to fund itself, so they check the box. They put money into their 401(k). They might have a Roth IRA out there somewhere that someone helped them open years ago. They're in the game, but not really playing it, because their investments don't tie back to a clear plan. Their allocation isn't aligned with what they really want out of life. And the biggest one, they'll react to headlines, because they don't have a clear plan of their own. If you ask why they're invested this way, the answer is usually, I don't know, this is what I was told to do. That's to no fault of anyone. Life is hard. We're juggling a million things at once, and we can't get everything right. But if you have some awareness that this might be the game you're in, let's try to move you to game three, the optimal investor.

This is where things finally click and you feel confident. The game shifts from what will make me the most money to what will help me live the life I want to live. They aren't copying their coworker. They get curious. They start to ask better questions about their future. They take the time to define what they want, not perfectly, but clear enough to start aiming toward it. That clarity can be hard to do on your own. It usually comes through real conversation, maybe with a spouse, a family member, or a friend, about what matters, what they want more of, what drains them, and what they'd regret missing out on. Once a picture starts to form, the investment strategy gets simple. It supports the vision. No more chasing, no guessing, no reacting to noise. That strategy will look different from person to person, but although the portfolios differ, they start with the same principles. The plan drives the investments, not the other way around. When you have your own financial plan, there are assumed returns, target returns in the plan, and your investment approach will most likely be aligned to pace or outpace those assumed returns. A conversation might be: if your plan works beautifully at an assumed 6% return a year, why day trade for an extra buck? Why take the unnecessary risk? And on the flip side, if your goals require more growth, sitting in cash or investing conservatively might not be the best option.

The key thing here is that this game provides a feeling of confidence. When you take control of your financial future, the result is confidence. Clarity breeds confidence. The optimal investor doesn't panic when the market drops overnight. They understand that volatility is simply the toll we pay, the fee for long-term growth. They're not just trying to get rich. They're trying to build a life they actually want. What a concept, am I right?

So where does someone even start? Maybe by going inward, which sounds a little cliché, I know, but not with CNBC or YouTube, and not with whatever your friend or coworker says you should do. Start with normal human questions. What are the moments I want more of? What would I regret not doing? How would I spend my time if money wasn't constantly weighing on my mind? If the answers don't come right away, that's normal. It just means we have some work to do, and maybe a conversation to have. It does take effort. Sometimes people think this will come through some epiphany. It's not going to be the most comfortable exercise of all time, it just isn't. It also takes a lot of reminders, because we forget easily. And once that picture starts to become even a little clearer, investing stops feeling like a guessing game.

I learned the hard way. Game one was fun until it wasn't. Chasing quick wins didn't make me happier, it just made me busier, more distracted, and frustrated at times. So I'll leave you with this. What game are you playing, and why isn't it game three yet? Thanks for hanging with me today. I'll see you next time.

Hosted byNick GeorgeCFP®, ChFC®, CLU®, IWA™FounderView bio →

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