What kind of investor are you? Type 1, 2 or 3?
How to become a better investor by changing the way you read and watch things
Most investors think they're rational.
But chances are, you're not the kind of investor you think you are.
“One of the great challenges in life is knowing enough about a subject to think you're right, but not enough about a subject to know you're wrong.” - Neil deGrasse Tyson
In The Dutch Investors’ podcast recording room, you’ll find three large posters, each about a meter tall, of some of our biggest sources of inspiration: Warren Buffett (no surprise there), Charlie Munger (obviously), and… Neil deGrasse Tyson.
Now you might be wondering, what does an astrophysicist have to do with investing? At first glance, not much. But with a bit of imagination, and a willingness to look at things from a different angle, there are more similarities than you’d think.
Our main goal is to expand your investing universe by introducing you to excellent companies. But to do that well, we also need to help you (and ourselves!) avoid common mistakes, especially the ones that trip up even experienced investors. One of the biggest? How we take in information.
We want to give you the tools to truly think independently, to spot nonsense, to avoid echo chambers, and to challenge what everyone else is saying, especially when it sounds convincing at first glance. One of the big ideas that connects both astrophysics and investing is exactly that: information, and more specifically, the way we often misinterpret it.
We started this piece with a quote from Dr. Tyson. But before we dive deeper into what he meant, and why it is relevant for you, we have a question for you.
You read a headline: “Company XYZ doubles its profits in a year.” Sounds great, right? And for sure, it might be, but most people take that kind of information at face value. And that’s where things go wrong and become risky.
Maybe the company’s profits went from $0.01 to $0.02. That’s still a double, but hardly impressive. The numbers may be accurate, but without context, they can seriously mislead.
Neil deGrasse Tyson often says that objective truths matter, facts that are true, no matter what you believe. But he also warns: without context, even true facts can mislead. In both science and investing, it’s not enough to know the numbers or statistics, you need to understand the story and context around it.
This usually leads to one of three common reactions.
Type 1: Taking it at face value.
Type 2: Taking it one step further, but not quite enough.
Type 3: Is always skeptical and asks questions about it and thinks independently.
Most people are either type 1 or type 2. There are not many ‘type 3’ investors. However, you can be! The very best investors are never type 1 or 2, always type 3.
Let’s explain each type a bit better so you can decide where you fit best.
🧠 Type 1 - The naïve investor
This is the most common reaction, due to evolution.
You see the words “profits doubled” and your brain jumps to a simple conclusion: doubling means fast growth, which is good, maybe even a buy signal or proof the company’s booming. That’s not strange at all. In fact, it’s a deeply human response. We’re wired to believe others. Historically, it was essential for survival.
If someone told you not to eat a certain mushroom because it could kill you, you trusted them, no questions asked. That instinct kept you alive, and it still plays a role in our brain today, just in a different context. If someone yells “Fire!” or suddenly bolts in panic, your brain doesn’t pause to analyze. It’s hardwired to believe it and act on it.
Type 1 investors don’t stop to ask questions or look for context. These were the people who survived thousands of years ago. That’s why most people today are still Type 1 investors, evolution tends to preserve what’s essential for survival.
Unfortunately, in the modern Western world, life is so comfortable that this instinct, the one that kept us alive for thousands of years, can actually work against us. Especially in areas like the stock market. The brain assumes the information is true and only deals with the consequences later.
🧠 Type 2 – The half-curious investor
Type 2 investors go one step beyond the basic level.
These types of investors read “profits doubled” and think, “Hmm, interesting… but what’s behind that?” They might scan a press release or glance at the earnings call summary. Maybe even check if last year’s numbers were unusually low. They’re thinking about it, but it’s not enough.
This type of investor wants to be rational. They’re aware that things aren’t always what they seem. But they often stop halfway. They find just enough confirmation to support the original conclusion, or they get distracted, lose focus, and move on before connecting the dots. Type 2 investors tend to be pretty passionate and confident about their subject. They know just enough about a topic (investing, for example) to think they’re right, but not enough about the topic itself (and the surrounding disciplines) to realize they might be wrong.
It’s not laziness, they have the right intentions. But they have the illusion of doing research without actually challenging their beliefs. Though they don't believe everything that is said, like Type 1s, they are nevertheless susceptible to subtle forms of persuasion.
Most investors live somewhere between Type 1 and Type 2. And that’s okay, awareness is the first step.
But there’s another type of investor.
🧠 Type 3 – The independent thinker
Type 3 investors are always skeptical. They see “profits doubled” and immediately ask:
Compared to what? Why? Is it sustainable? What changed? What's being left out? What are they not telling me?
Although their instincts push them to act like Type 1 or Type 2, their brain is (trying to) keep them grounded. It’s telling them to be skeptical and curious.
This type is rare. Only if you really put in the time and effort to learn, to be curious and dare to be and think differently. It takes effort, humility, and discipline to become a Type 3 investor. You need to unlearn the reactive habits that evolution handed you, and replace them with structured thinking, critical questioning, and emotional restraint.
Type 1 is instinct.
Type 2 is intention.
Type 3 is mastery.
The best investors in the world are always Type 3!
Why all of this matters
Shallow knowledge makes you easy to fool. It’s the reason we are on a life-long journey through the investing universe to learn and find bright stars. Deeper knowledge helps you stay calm, ask better questions, and avoid rushing into bad choices. It’s the reason we describe ourselves as life-long-learners, together with our amazing TDI-members and subscribers.
So why does all this matter? Because knowing your limits, is just as important as knowing the market. And the moment you say, “Maybe I don’t know enough yet”, that’s where real investing wisdom begins. That’s the road to becoming a curious, skeptical Type 3 investor!
Alright. We have talked about the what and the why. What we haven’t talked about is the how. So here are a couple of useful and practical tips you can apply today.
How to apply this yourself
It all starts with a simple truth: how you think determines how you invest. And most people don’t think deep enough. But the good news is that you can train that. Here are five practical habits you can start using today.
🔍 ➤ 1: Ask (better) questions
“It’s not supposed to be easy. Anyone who finds it easy is stupid.” – Charlie Munger
Most investors ask: Is this a good stock? How fast is the company growing?
But the questions are too shallow. Better questions sound like this:
What am I missing here?
What are they not telling me?
What are the 2nd and 3rd order effects of this?
What are the counterarguments?
What risks aren’t in the headlines?
Munger taught us that the truth often hides in the opposing view. Don’t just ask why something could work. Ask why it might not. You don’t have to know everything. But you do have to know where your blind spots are.
🧠 ➤ 2: Don’t trust your first impression
“Your first conclusion is usually wrong.” – Daniel Kahneman
(loosely translated)
You read something and it sounds simple and understandable. However, understanding isn’t the same as seeing the full picture. Especially in investing. Behind a headline like “profits doubled” could be:
Temporary tailwinds
Accounting tricks
A low comparison base
Your initial reaction typically feels right. But like an optical illusion, the truth is buried deeper.
🛠️ ➤ 3: Look for nuance, not confirmation
“The world doesn’t reward the people who are right. It rewards those who know when they’re wrong.” – Ray Dalio
It’s human to look for things that confirm what you already believe. Nevertheless that makes you vulnerable. The best (type 3) investors actively search for arguments that can challenge their thinking and believes. It’s uncomfortable and the feeling can suck. But discomfort is where growth lives.
📚 ➤ 4: Read books, not headlines
“Read 500 pages a day. That’s how knowledge builds up. Like compound interest.” – Warren Buffett
Want an edge over 95% of the market? Read. Not subtitles, headlines or news articles. Really read. Read books, annual reports, earnings transcripts, letters from great investors. Not because it gives you all the answers, but because it teaches you to think beyond the obvious.
Start with just 15-30 minutes a day, and 12 months from now you’ll be happy you did. Knowledge compounds faster than you’d expect.
✍️ ➤ 5: Write and think before you act
“Writing is the best way to clarify your own thinking.” – Daniel Kahneman
Before you buy or sell anything, write down:
Why am I doing this?
What do I expect?
What would make me change my mind?
Writing forces you to be honest with yourself. It slows you down (in a good way). Take time to reflect on your thinking before you act. After analyzing a company, force yourself to stay away from the buy button for at least 2 to 4 weeks. Then revisit your thesis with fresh eyes and make your decision. Write things down. Give your thoughts space. When you look back later, you’ll often realize it wasn’t as clear or solid as it felt at the moment.
Investing isn’t about being fast. And it’s certainly not about always being right. It’s about thinking independently, taking the time to reflect, to ask better questions, and to stay open to opposing views. Clear, independent thinking starts with skepticism, curiosity, and the courage to challenge your beliefs. That’s how you move beyond being a Type 1 or Type 2 investor…
Type 3 investors are rare.
But if you’re willing to put in the work, you can become one. The fact that you made it to the end of this article proves you are doing something right.
The Dutch Investors
Super artikel! Dank jullie wel.