Halloween is nearly upon us. And investors have experienced their share of spooks this month. I shared a scary investment story. Inflation grew and sent the markets tumbling. And Mark Zuckerberg continued to use his unsettling Metaverse avatar.
We’ve faced some hard times this month. So I wanted to lighten things up and write about the different kinds of investors who may be keeping up with Early Investing. And with Halloween right around the corner, what better way to explore our different investing styles than with different types of Halloween candy?
If you’re curious about what kind of Halloween candy you are based on your investment style, keep reading. (Note: I am not responsible for any inspiration you may have to snack on some of these as a result of reading this article.)
Value Investor: Hershey Bar
Like the Hershey bar, value investors are a classic flavor. And like Warren Buffett (the face of value investing), value investors are fairly traditional in their approach. They invest in startups that they see as undervalued in the current market, but that potentially have major intrinsic value. Then when the market corrects, those companies shoot up in value, giving value investors the potential for high returns. These investors are the ultimate observers of “buy low, sell high.”
Hershey bars — known as “The Great American Chocolate Bar” — have been sold since 1900. And they’ve been going strong ever since. In 2021, The Hershey Company generated around $9 billion in sales. Hershey bars are the most popular brand of chocolate bar in the U.S. So it’s clear the market agrees that they have high intrinsic value. And they’re never too expensive. Value investors just can’t resist that.
Buy and Hold Investor: Tootsie Roll Pop
Buy and hold investors are not concerned with short-term market moves. They invest for the long haul. And they’re used to waiting months — or even years — before they see returns. So they’re very patient. For them, investing can be like eating a Tootsie Roll Pop. You have to take your time to slowly get through the hard candy shell of the lollipop and reach the Tootsie Roll center.
This is especially true for startup investors. With most startups, investors have to hold on to their investments for at least five to 10 years. Sometimes a startup gets unexpectedly acquired or gets on an accelerated path to an initial public offering, and investors get to the Tootsie Roll faster than they thought they would. But for the most part, buy and hold investors don’t mind taking their time.
Income Investor: M&Ms
Income investors want a steady stream of income from their investments. They are usually less concerned with making 100x returns in a single investment. Instead, they value getting regular returns they can count on. Income investors want consistency at regular intervals (like snacking on M&Ms).
That doesn’t mean they restrict their investments too much, though. Just like you can choose from regular M&Ms, peanut M&Ms, crunchy cookie M&Ms, caramel M&Ms or even pretzel M&Ms, income investors have options. Whether it’s revenue share or debt deals in the private markets or government bonds, dividends, or stocks in the public markets, income investors want a little at a time — and they want that reliability.
Impact Investor: Reese’s Cups
Impact investors look for more than just financial returns. They also aim to help bring some social or environmental good to the world. That can take many different forms. For some impact investors, it means they invest in companies whose missions align with their own values. For others, it may just mean they avoid investing in companies that don’t align with their values. Some impact investors focus heavily on companies that fight climate change and other environmental problems. Others focus on companies that try to end world hunger or increase equality. There are impact investing strategies for any number of causes in the world.
But no matter an impact investor’s specific focus, those two ingredients — financial profit and positive impact — are essential. It’s like a Reese’s Cup. The combination of chocolate and peanut butter is what makes Reese’s a truly iconic candy. You cannot have one ingredient without the other and still have a Reese’s. The combination of the two brings joy to millions of people around the planet — which is often something impact investors aim to do too.
Contrarian Investor: Candy Corn
Contrarian investors are a polarizing bunch — just like candy corn. They aim to buy stocks when they’re in a down market and then sell high later when the market goes back up.
Of course, contrarian investors aren’t the only ones to follow this strategy. “Buy low, sell high” is a mantra that all investors live by. But it’s psychologically very difficult to buy during a bear market, so this strategy is harder to implement than it seems. Plenty of investors are loath to invest when a stock is down. If market sentiment favors certain stocks over others, a herd mentality can take over. And it can be difficult for an investor to choose to go in the opposite direction. But contrarian investors aim to make this difficult choice consistently. The ability to make and stand by the unpopular choice is what ties these investors to candy corn. It’s not everyone’s cup of tea — or Halloween candy of choice — but it works for them.
That’s all the candy I’ve got for today. Happy investing — and happy Halloween!