A new type of investor is emerging that is breaking the binary bear / bull mode, noted a recent study of wealthy investors.
Investor categories: Bulls, Bears and now Owls?
Bulls are, as the name implies, an optimistic group. They tend not to listen to family and friends regarding investments, preferring to consult with advisors. This group has a high allocation towards equities, but is smartly diversified in their portfolio. This group maintains a 41 percent allocation to equities, much lower than the mind numbing 60 percent stock/40 percent bond traditional allocation used by mainstream advisors, and highlights how wealthy bulls view the world. This group also allocates 11 percent to alternative investments and is willing to make decisions alone, often learning more from mistakes than successes, the report noted. This group is speculative, positive on life and have a somewhat risky attitude.
Investor categories: Owls vs Bears
Contrast this group with the bears.
This group of investors are cautious and uncomfortable around bullish stock projections. As such, they don’t like talking with financial advisors, the report noted with a straight face. This group allocated just one third to stocks while putting 26 percent in highly liquid cash or cash equities. This group prefers speaking with their family and friends about investors as opposed to striking out on their own, blazing an independent trail.
Using a word association test on 750 wealthy study participants, a group that had average total assets of $13.2 million, the research from the Scorpio Partnership and sponsored by SEI, a wealth management advisory firm also pointed to a new category.
Investor categories: The Owlish sentiment
The “owls” are a different animal, however. The new category being put forward by researchers take a pragmatic approach and rarely act unilaterally. This group tends to trust their heads over hearts and are responsive to input from trusted associates. They prefer the comfort of consensus before acting on investment decisions and allocate to equities almost as much as bulls. This group has a distinct preference to invest in fixed income. Like the bearish group, they invest nearly 25 percent in fixed income while the bears put a similar amount in cash. Unlike both the bulls and bears, owls don’t learn as much from mistakes, which the report notes could be due to their pragmatic attitude.
The study was equally populated with bulls, bears and owls, at nearly 33 percent in each category.