What You Need To Know About The Follower Investor Personality
Individual differences in characteristics and behavior manifest themselves in investing decisions. When you opt to invest, you must commit your resources and wealth to the venture and understand your investing nature and behavior. People with the Follower Investor personality are passive and follow their friends and peers, as well as current trends, and invest because it is being done by “everyone.”
5 Traits of the Follower Investor Personality
1. Carefree Attitude
Followers have a relaxed and carefree attitude towards life. They trust others and can be easily convinced. Such investors are sociable and get along with people. Their trusting quality also attracts many friends and a broad network of people. However, this quality may cause trouble when they make faulty investment decisions.
2. Passive Nature
Because of their carefree approach to life, follower investors are not genuinely interested in investing, so they need to be influenced to invest. They are motivated by other people, such as their spouse, a friend, salesperson, or relative. Their lack of interest in investing may prevent them from conducting due diligence. A follower in such a situation will incur losses when things fail.
3. Keeping Up With the “Joneses”
Another reason these investors are called followers is their need to keep up with others. They want to be involved and not left out. They feel they should share in the investing journey towards financial freedom. This trait encourages them to seek financial advice from everyone—family, friends, and those who seem to know about investments—everyone except professionals.
4. Easily Misled by Information
Followers have sources they implicitly trust; therefore, they are susceptible to believing false or unverified information. If the information sounds logical and true, a follower is likely to act on it. Follower investors are described as people with a herd mentality—investors waiting to hear about a lucrative opportunity and impulsively invest. Investment ideas are even more appealing to them if people try it and are successful. Followers are led by impulses rather than reasoning and critical thought. If someone has an idea, they will try it.
5. Lack Long-Term Investment Plans
While others are interested in long-term planning and thinking critically about an investment idea, a follower does not see this as essential. A lack of planning often causes followers to miss out on an investment’s full potential. A lack of determination often causes followers to miss out on opportunities. They do not see the value in seeking opinions from professional financial advisors.
Positive Attributes of Follower Investors
Flexibility
Followers are flexible in their thinking and actions, which allows them to follow others in the investment markets. This trait benefits them when lucrative opportunities arise. They will be willing to take them, especially if financial advisors verify their viability. For example, followers often purchase or build commercial property in a developing area on the assumption that “everyone is doing it.” Although not all investment opportunities are promising, followers are willing to take a risk and join the investment bandwagon.
Agreeableness
In the five-dimension personality model, followers are likely to be agreeable or open people. Such people are accommodative and can make good investment partners. It is easy to reason with and persuade them to consider a specific investment opportunity. They are trusting and do not have many rules governing their lives. If an investment idea sounds logical and beneficial, they will pursue it.
Open-Minded
Because followers have an open mind, they have the potential to accumulate wealth. They can gain success by following people with new ideas. They may not be particularly interested in investing, but whatever excellent opportunities they choose will be rewarding. A follower is not keen on making long-term plans for investments. This issue can be addressed later, especially if an investment offers good returns.
Excellent Team Players
Followers make ideal team players in group investment planning. They will support good ideas others suggest because they are not initiators. While it is usually difficult to gain consensus while working in a group, followers make that task seem effortless. Followers are more relaxed, carefree, and happy. This attitude is vital for dealing with stressful investment situations, and they can boost an investment group’s morale. Followers remain composed even in a crisis. Flexibility and openness are important traits for people who enjoy new experiences and adventure in the investment world.
Shortcomings of Followers
Exposed to Risks Due to Herd Mentality
A herd mentality can be risky, especially in situations involving scams. Followers do not consider and evaluate their decisions; they are ready to plunge in because the crowd is doing it. That is how investors have lost their money in Ponzi schemes or duped by high-yield, quick-return ideas. Eventually, they experience losses by making such decisions.
Poor Planning
A follower may have an excellent opportunity to invest but does not reap the benefits because of lack of planning. For example, purchasing stocks or shares is a good idea, but an investor should have a plan. Most followers who choose this idea get minimal yields because they lack strategy. Others miss opportunities for buying or selling because they lack knowledge about the purpose of and need for planning.
Avoiding Due Diligence
While followers may benefit from flexibility and openness, the same traits increase their chances of incurring losses. Followers rarely conduct due diligence when presented with an idea. When followers implement a bad investment decision, they experience losses because they did not thoroughly evaluate their choice.
Follower investors generally do not take the initiative and create new ideas, significantly hindering their potential to use their abilities. They may not be interested in investments, but even a little effort would make a significant difference. Lack of initiative can become a weakness in their lives. Followers are capable of mitigating their limitations as investors by researching and performing due diligence.