Now I'm not referring to your level of risk exposure, but rather your investment approach. This is something every investor should know, or at the very least consider. By the end of this article you will have a much better understanding, and may even come to a realization that you aren't even an investor after all!

Simply put, an investor buys an investment with the intentions of holding it. An investor wants passive income, a money tree so to speak. If you buy stocks, options, futures, commodities or real estate with the sole intention of realizing a capital gain, you my friend are a trader; not an investor. This isn't necessarily a bad thing, but it's definitely not the same thing as an investor. On a similar note, most people who consider themselves investors are really savers. They do very little, if any, research on their "investments" and are VERY vulnerable to market corrections, because they only know how money is made on the way up. This may currently be you, but don't worry; you have come to the right place.

There are three main investor profiles that you may want to consider, because it will ultimately influence your investment strategies. There is the fundamentalist, technical and sophisticated investor. The fundamental investor is interested in financial statements, management teams and what a given company does to reel in profits. The goal of the fundamentalist is to find healthy, sound companies to invest and grow with. They want dividends and care about the state of affairs within the company. A fundamentalist can find very good financially sound companies to invest in, but still lose a lot of money because they lack proper market timing, a key skill that a technical investor possesses.

A technical investor doesn't care about a company's' financial affairs. He seldom, if ever, reads a financial statement and isn't interested in the changes made by new management. Technicalists read charts, lots of charts. They are concerned with the ebb and flow of the market. Dow Theory, chart patterns and trends are what technical traders look to for understanding. Technicalists swear up and down about the superiority of technical analysis and much money has been made on their behalf, but without solid fundamentals a technical investor can wake up only to find their account nearly wiped out because their analysis didn't consider important economic events.

So which is it? Which is better, fundamentalists or technicalists? Well I don't believe either truly bests the other. Certainly a combination of both approaches could be incorporated, right? Yes, and it has with much success. The sophisticated investor uses every tool at his or her disposal. They use the fundamentalists investing philosophy to find great companies who will act as wise stewards with their money. They also possess strong technical skills necessary to ride smoothly through market trends, because they don't want to get hammered in a bear market like the average investor will.

So what kind of investor are you? Do you still want to be that type of investor, and if not what kind of investor would you like to be? You may have realized that you were never an investor to begin with. Are you a trader? Traders don't like commitment and don't spend much time vested with any given company. In an upcoming article I will introduce the many facets of trading and why a sophisticated trader may have the highest ceiling of all! Till next time…