Date: May 17, 2021

What Type of Investor Are You? Peter, John, Mary or Sue?

Are you a thrill seeker? An adrenaline junkie? Or do you tend to play it safe in life? Now ask yourself, does your financial risk tolerance match that of your personal appetite for risk? 

As a financial advisor in Gilbert, AZ, I see so many people get these types of risks confused – just because you may like to skydive, for example, doesn’t mean you necessarily want to take big risks with your hard-earned money. In our experience at Watts Gwilliam and Company, most people don’t know what type of investor they really are, but this is an important first step in creating a financial plan. 

Helping families incorporate appropriate investment strategies into their plans, we’ve come to realize that most people generally fall into one of four different “investor” categories. It’s important to understand not only what type of investor you are, but also common pitfalls you need to watch out for as you’re investing. 

Below are 4 examples of what financial risk looks like. Take a look to see which one you identify with. 


Scared of the stock market? Not sure where to start when it comes to investing? Contact the Watts Gwilliam team and get a conversation started.


Peter: Conservative

Meet “Peter.” Peter is a conservative investor who’s more concerned with preserving his wealth than earning market returns. The thought of investing makes his stomach turn, and if it were up to him, he’d keep all his money in a savings account where he wouldn’t lose a single penny.

On the surface, it doesn’t seem like there’s anything wrong with Peter’s conservative investing approach. He’s not really affected by stock market volatility and, in his mind, he’s taking on less risk. 

But here’s the thing about Peter – he’s likely not earning enough to sustain himself in retirement and outpace inflation. Even if his balance grows by 2 percent a year, these are nominal returns, meaning they don’t account for inflation. Once you adjust for an average 2.6 percent inflation rate, you find out that Peter is actually losing money in the long-run. Even if his account balance is growing, his purchasing power is decreasing. 

Peter’s investment strategy is fine if his goal is to save money that he’ll need in one to three years, but it’s not ideal for long-term accumulation. He will likely struggle to build wealth, have to live below his means in retirement, and may even run out of money. 

How Peter Could Benefit from Talking with a Financial Advisor

Investors like Peter often need a trusted partner who can help calm their fears about the stock market and help them develop an investment strategy that strikes a balance between building sustainable wealth and minimizing risks.

If you think you may be an investor like Peter, check out our new guide: Financial Planning Gilbert, AZ, and contact us for more specific guidance.

John: Aggressive

“John” is after one thing and one thing only – high investment returns. He’s not satisfied with hitting benchmark averages. He wants to grow his wealth fast, and that often means taking on more risk in hopes of higher returns. 

Aggressive investors like John tend to be overly concentrated in stocks (whether it be one particular stock or a sector of stocks). They ride a wave of excitement when a stock is outperforming, but they can crash hard when volatility occurs (often losing much of their wealth). 

Investors like John are also more likely to follow stock market trends. They may try to time the market based on what they think will be the hottest next stock. This strategy typically backfires for people like John. Studies show that investors who actively buy and sell typically end up underperforming the benchmark average by 6.5 percent a year. 

How John Could Benefit from Talking with a Financial Advisor

Even though John has an appetite for risk, that doesn’t mean he should invest accordingly. If he’s nearing retirement or is aggressively investing money he plans on using in a few years, he could take a huge financial loss just when he needs his money most. 

 John would benefit most from meeting with a financial advisor who can help him align his investment strategy with his long-term goals and dilute his concentrated stock position. Helping clients with these concentrated stock positions is one of our specialties at Watts Gwilliam and Company. For more on what this looks like, read our recent blog post: How to Turn Concentrated Stock Holdings Into Income Generators.

Mary: Somewhere In-Between

“Mary” falls somewhere in between Peter and John. She’s not super conservative, but she wouldn’t label herself an “aggressive” investor either. She’s a middle-of-the-road type of investor who values her equity, but she’s is fine with taking on a little more risk if it means a higher return.

In our experience as financial advisors in Gilbert, AZ, most investors are like Mary. They’re what we call “moderate” investors – they can tolerate some risk and are willing to diversify more than a conservative or aggressive investor. 

Are you like Mary? Read our recent blog post: What’s Your Financial Risk Tolerance?

How Mary Could Benefit from Talking with a Financial Advisor

There’s nothing inherently wrong with being a moderate investor. In fact, it’s the category we see people identify with most. But it could have some drawbacks depending on where you are in your financial journey. 

For example, if Mary is in her early 30s and saving for retirement, she has decades to ride the waves of stock market volatility. If she’s on the conservative side of moderate, she could miss out on growth opportunities by the time she retires. 

On the flip side, if Mary is in her late 50s and approaching retirement, it may be time for her to take on a slightly more conservative approach. The right financial advisor can help her lay-out her financial goals to ensure she’s taking on the appropriate level of risk.

Sue: Guessing Her Way Through It

“Sue” is already investing, but she has absolutely no idea what she’s doing. She’s guessing her way through it, relying on advice from friends and family to help her get by (regardless of whether this advice is right for her financial situation). 

Investing is overwhelming and confusing for Sue because she doesn’t know enough about it. She has a million questions, like: 

  • Am I investing in the right vehicles? 
  • Are the fees I’m paying too high? 
  • What’s the difference between a mutual fund and an ETF?
  • Am I even on track to reach my goals? 
  • Do I have enough to retire when I want to?

On the bright side, at least Sue is investing. Getting started is often the hardest part, and Sue is on her way to building wealth and securing her financial future. 

But on the downside, Sue could be making alarming mistakes that could set her back on her financial journey. She may be carrying too much risk in her portfolio, paying extremely high fees, or missing out on opportunities that could set her up for a secure retirement. 

Another common mistake we see investors like Sue make is not having a diversified portfolio. Read our recent blog post: Why Diversification is Important: Financial Advisor in Gilbert Explains.

How Sue Could Benefit from Talking with a Financial Advisor

Investors like Sue should really find a trusted financial advisor who can help them learn the basics of investing, so they have more confidence in their financial decisions. 

Which Category Do You Fall Into? 

You may find that you perfectly fit into one of the categories above. Or you may find that you drift between a few of them depending on stock market performance and life circumstances. 

For many investors, 2020 was a scary year. In light of the pandemic, you may find that your risk tolerance is more conservative than it was in the past. 

In times of uncertainty, don’t underestimate the value of having the right financial advisor in your corner as you invest. A good financial advisor can help you: 

  • Stay cool, calm and focused in times of stock market volatility
  • Strike a balance between growing your wealth and protecting it from the unexpected
  • Minimize fees and taxes that could potentially erode the value of your portfolio

Working with a financial advisor can also help you uncover investment opportunities you may not have considered on your own. In fact, the Watts Gwilliam team has identified one in the hotel sector. Watch our short video here or watch the more detailed overview here.

How Watts Gwilliam and Company Can Help

At Watts Gwilliam and Company, we’re passionate about helping you accomplish your financial goals, whether that’s preparing for a happy retirement or buying your next home. If you’d like to know if you’re on track to reach your goals, schedule a complimentary conversation with our team. We can help you analyze your risk tolerance to create a customized investment plan that puts you on the right track to reaching your dreams while allowing you to sleep peacefully at night. 

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David Watts

Dave is one of the firm’s founders. He helps business owners, professional athletes, and other high-net worth clients develop and implement financial plans and strategies. He also specializes in helping those with single-stock positions to diversify and manage their financial lives. Other areas of specialty are wealth transfer plans for concentrated stockholders and business owners; tax minimization strategies for those with employee stock options; cash flow management; and risk management planning.