What Is Your Investment Style?

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What Is Your Investment Style?

Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well.
Knowing what your risk tolerance and investment style are will aid you select investments more wisely. As there are several different types of investments that one may make, there are actually only three particular investment styles – and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.

Of course, if you get that you’ve a low tolerance for risk, your investment style will most likely be conservative or moderate at the best. If you’ve a high tolerance for risk, you’ll most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.

If you’re saving for retirement in your early twenties, you should use a conservative or moderate style of investing – but if you’re trying to collaborate the funds to purchase a home in the next year or two, you’d prefer to use an aggressive style.

Conservative investors would like to maintain their first investment. In other words, if they invest $5000 they would like to make sure that they’ll get their first $5000 back. This type of investor normally invests in common stocks and bonds and short-run money market accounts.

An interest earning savings account is very basic for conservative investors.
A moderate investor normally invests much like a conservative investor, but will use a portion of their investment for higher risk investments. Several moderate investors invest 50% of their investment in safe or conservative investments, and invest the remainder in riskier investments.

An aggressive investor is willing to take risks that other investors won’t take. They invest higher amounts of money in riskier ventures in the hopes of achieving bigger returns – either over time or in a short amount of time. Aggressive investors much have all or most of their investment tied up in the stock market.

Again, determining what style of investing you’ll use will be determined by your financial goals and your risk tolerance. Regardless what type of investing you do, however, you should carefully search that investment. Never invest without having all of the facts!

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February 26 2009 08:09 pm | Personal Finance

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