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Your Investment
Style Makes You the Type of Investor You Are
Your own threshold level of risk tolerability and your personal
investment style are very closely related. In fact together they
decide what type of investments you are likely to choose. While
there are numerous investment options from which you can pick and
choose, the three basic styles of investment are interlinked to
your risk-taking capacity. The three basic investment styles are
conservative, moderate and aggressive.
These means that, if you have a low risk tolerance and not feel
very comfortable with high-risk ventures, your investment style
will be conservative or moderate at the outer limit. On the
contrary, if you are capable of taking high risks and your risk
tolerance limit is high; your style will be moderate to
aggressive. Additionally, your financial goals, or the money you
wish to make within a stipulated time will also decide on the
style of investment that you will use.
Needless to mention the rate of return is directly dependent on
the investment style. For instance, if you are in your ‘20s and
saving for your retirement, you can easily afford a conservative
or a moderate style of investing. On the other hand, if you are
planning to buy a house in the coming two years, you need to adopt
an aggressive style of investment.
People, who fall in the category of conservative investors,
usually want their initial investment to be left intact. This
means that if they invest $5000, they want to be assured that they
will get their $5000 back. These types of investors usually invest
in common stocks and bonds which are also known as short term
money market accounts. It is evident that conservative types of
investors would not like to take too much risk with their money.
The usual savings account with regular earnings from interest is
one of the favorite investment options with majority conservative
investors. A moderate investor on the other hand behaves much like
the conservative investor, except that a part of his money is
invested in high-risk ventures. Most moderate category of
investors invest about 50% of their total investment money in safe
or conservative investment plans and the other in high-risk
investment plans.
The aggressive investor on the other hand goes whole hog with his
investment plans and is capable of withstanding any risk in the
investment scenario, which other investors are least likely to
take. Their investments are often high and the ventures they
choose to invest in are also considered high-risk. The reason why
they do this is that they are convinced that their returns also
will be equally high in the shortest possible time. Most or all of
the money belonging to aggressive investors are usually blocked in
investments made in the stock market.
Last but never the least important thing to remember is that your
investing style will be determined by your financial ambitions and
your ability to take on risks. Irrespective of the type of
investment plan you opt for, never take any step without having
done your homework and proper research to know about the facts
behind the figures.
Article Source:
http://www.imargin.com |
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