By Kendrick Chua
Unleashing the Animal Instinct within You
With the ongoing and seemingly prolonged global financial crisis, it is wise to take a step back and examine our investing attitude. Metaphorically, each of us portrays a particular animal with our investing attitude and our animal instincts may be indicative of how our personalities are dealing with the on-going turmoil. But ever wondered which animal you are? Let’s find out.
The Bull represents optimism and hope. He always sees opportunity in every crisis and is not daunted by the economic condition no matter how bleak it seems to be. As a result, he has a long term view on his investments and doesn’t mind the extreme volatility or even if his portfolio drops 50%! He believes it will bounce back “eventually.” You’ll love to be in the Bull’s company as his optimism rubs on you. The Bull believes this is going to be a fantastic year as he shares the spotlight with his cousin, the Ox.
The Bear is the extreme opposite of the Bull. He predicts gloom and doom, believes each economic crisis is the “worst there is” and every where he looks, he sees the sky falling. He is far worse than Chicken Little. The bear invests for the short term. Any profit, no matter how small, is quickly locked in because he fears that tomorrow or the next minute, the market is going to crash. The Bear short sells everything in hopes that the market does indeed crash. But after the smoke has cleared the problem is no bigger than an acorn dropping on his head. Refrain from being in the territory of the bear, he will eat you alive.
The Pig is greedy to say the least. He gobbles up everything in sight. The Pig still holds on to his stocks long after he should have locked profits. If there were run-ups during the bull market hey-days such as Paxys (PAX) and Pacifica (PA), he feels there should be several run-ups coming again and so he stayed and held his positions only to find out later on that the Bear is already sizing him up ready to chow him down.
The Chicken lives up to his name, constantly being fearful of everything. On bull runs, he is scared that the moment he invests, the market will start to go down and go into a deep and prolonged correction. Yet, he is also afraid of bear markets for fear that the market can go even lower than the current levels. As a result, Chickens stays invested in time deposits and complain to other Chickens that the yields are low. The Chicken loves misery and he looks for company.
This avian creature is slightly braver than his cousin, the Chicken. The significant difference between the two is that while the Chicken is too, well, chicken, the Turkey is gullible. He takes pride in joining the bandwagon, believing that where most people place their money is a sure thing. It follows high-profile analysts and acts on their recommendation even though conventional wisdom tells otherwise. An example would be Jim Cramer adamantly calling a hold on Bear Stearns. Turkeys followed his advice and suffered.
Known as the scavenger of the market, the Vulture buys investments that are long dead and forgotten. He lives up to his name and profited from the great bull run of the PSEi from 2003 to 2007 by either investing in individual stocks or mutual funds. Both reaped handsome rewards. The Vulture now circles the sky ready to swoop down once again anytime soon for dead and battered stocks—truly a feast for him.
The fastest creature in the financial market, the Cheetah loves trading actions. He uses technical analysis and often buys and sells several stocks in a single day. The faster the action, the better it is for him! He loves the adrenaline rush especially on key-reversal days! With the advent of online trading, things just got faster for him. He doesn’t look at any P/E ratio or EPS. For him, the time spent analyzing fundamental data can be better use plotting target prices and chasing break-outs.
The Tortoise abides by the slow-and-steady rule. He doesn’t get enticed by get-rich-quick and other Ponzi schemes. But when he does have second thoughts, he reminds himself that after all, it was his uncle that outran the hare in the race and he too will get his fair share of success. The Tortoise invested early in his life and does this regularly and is on track in building a sizeable nest egg by the time the race is finish. Whereas now he is being laughed at, by then, he will do the laughing.
The Lion is neither an optimist nor pessimist. He is a realist. And because of this, he has a well-diversified portfolio that can shield him from the Bear’s claw. He stacked up on cash on the sidelines and likes to do some scavenging before the Vulture scoops down. Moreover, he knows when to sell a battered stock or hold on to a winner. He does thorough research before plowing in funds and roars on the investment gurus that announces hot tips (he has their heads for breakfast). The Lion didn’t achieve his status as the king of the jungle. He did this by prudently managing his funds since he was a cub.
So which animal are you?
The Tortoise abides by the slow-and-steady rule. He doesn’t get enticed by get-rich-quick and other Ponzi schemes. But when he does have second thoughts, he reminds himself that after all, it was his uncle that outran the hare in the race and he too will get his fair share of success.
Kendrick Chua started his career as a life underwriter and licensed mutual fund representative for one of the leading financial institutions in the country three years ago. He is a regular contrinutor to Income-Tacts (www.income-tacts.com), the country’s premiere on-line community on personal finance. A marketing management graduate from De La Salle University in 2005, he has always shown strong interest and enthusiasm in financial planning and investment management. Other financial articles can be read in his blog, www.thewealthwarrior.net. Comments and suggestions may be sent to Kendrick.firstname.lastname@example.org