What type of investor are you?

If you can give this question a clear answer, the chances are you’ll have navigated this year’s markets with a bit more confidence in your decisions.

And that’s no small thing. Investors have had to contend with a lot over the past 12 months – from tariffs tensions and geopolitical flare-ups to a US market dominated by artificial intelligence giants. 

As we look ahead to 2026, this a good moment to pause, take stock, and reflect on the type of investor you are. Not just what you own, but how and why you invest – so you know your ‘type.’

Factor styles of investing

You may or may not have come across the idea of ‘factor’ investing. This offers one way of profiling ourselves. 

It’s a way of categorising investments by characteristics such as company size, value, momentum, quality, and volatility, to help explain the way they perform.

At a high level, this framework can be helpful. 

Portfolios tilted towards larger companies often feel steadier than those invested in smaller companies. And portfolios built around cheap “value” stocks often come into their own when markets turn against high-flying growth stocks. These patterns have shown up time and time again.

But factor labels are not completely reliable. 

The same factor can mask very different risks. A large company may look better on the surface, but a high valuation is sometimes the result of overstretched investor expectations that represent downside risks. A smaller business might outperform with a solid business model, even if the stock is volatile.

Universal investor types

So, rather than leaning to heavily on theory, let’s go back to the start of your investing journey. 

The first question that new investors face is quite straightforward, whether you want to actively choose your investments or if you’re happy to track the markets.

At its heart, this comes down to philosophy, and neither approach is right or wrong. Some investors believe markets are broadly efficient – that most available information is already reflected in stock prices – so finding an edge and consistently beating markets over the long run is extremely difficult. For them, taking a passive approach makes sense because they keep costs low, stay invested as a rule, and allow global markets to do what they’ve historically done over time: trend higher.

Other investors enjoy researching companies and forming strong views. They’re willing to accept the extra effort and the risk of being wrong in the belief that careful judgment can add value. 

Once that decision is made between active and passive investing, a second fork appears.

Depending on personality and early influences, active investors tend to be drawn more either growth or value investing – that is buying shares in companies because of their growth, or based on a belief that they’re undervalued. A blend of both styles is good diversification. Passive investors, by contrast, usually make a simpler choice; to reinvest the income generated from their investments or draw it as an income – this being an accumulation strategy or an income strategy.

It is still very common for investors seeking income to take an active approach, particularly when selecting companies known for their impressive track records of paying dividends, or with actively managed income-focused funds forming part of their strategy.

These four broad categories – value, growth, accumulation or income – capture how people invest far more realistically than technical factors, such as size, momentum or volatility. 

Active approaches: growth and value

Bold opportunists, rational opportunists

If you’re a DIY active investor, you’re in the driving seat. You choose investments based on your own beliefs and world view, and you live with the results. There are two churches:

The growth investing mindset is about looking for businesses that can significantly increase revenues and profits over time. As these companies are often young and disruptive, investors need the temperament to live with sharp swings in sentiment and not get too carried away.

Value investing is often considered the more patient discipline. It involves investing in companies – growing or not – because they appear undervalued by the market and waiting – sometimes for years – for perceptions to improve. This process can be slow, so it requires a lot of conviction.

In reality, many experienced investors blend the two approaches.

Passive approaches: accumulation and income

Compound kings and queens, dividend champions

Passive investors take a different view altogether. Rather than trying to beat the market, they buy investments like tracker funds and exchange traded funds (ETFs) that give them exposure to the market as a whole, or a particular sector.

With passive fund costs typically lower than individual share trading or active-managed funds, they can be a solid, low-cost options for investors. Additionally, global tracker funds also offer a good level of diversification and returns tend to be more consistent over the long term, with most major markets returning between 5%-10% a year on average since records began.

Some passive investors, as well as many active investors, reinvest income generated by their investments – whether dividends or interest – back into the fund, allowing the compounding machine to work most effectively.This ‘accumulation’ approach is well-suited to young investors with time to build wealth. 

Those who choose a ‘income’ approach don’t reinvest, instead drawing regular dividends from their funds. The key trade-off is that drawing income today usually means less compounding for tomorrow, so this tends to be the approach of retirees with large portfolios looking to supplement their income.

Your investment philosophy journey

Most investors don’t stay in one box for their whole lives. 

Someone might begin their investing life as a growth-focused, DIY investor, comfortable with risk. Eventually, they might partner with an investment manager who helps them blend growth and value active strategies to help manage risk. And in later life, priorities may shift again. The focus could move away from maximising returns and towards preserving capital and generating income.

The important thing is not to allow dramatic events in 2025 sway the type of investor you are. Understanding how you invest, why you invest that way, and whether it still aligns with what you’re trying to achieve can make all the difference when markets inevitably test you again.