subject: Investing-what's Your Style? [print this page] For you to be able to choose the right investment you should address what your risk tolerance level is, and then you will make a choice best suited for you. There are many different types of investments that you can choose from however there really are only 3 specific investment styles, and these three styles is what will be decided by your risk tolerance. These three styles of investments are conservative, moderate and aggressive.
If you are someone that has a low risk tolerance then naturally you would opt for conservative or maybe moderate at best. But if you are someone who has a high risk tolerance you will probably become a moderate or aggressive investor. As well as you risk tolerance, your financial goals will also determine what style of investing you would be best suited to.
If you are in your early twenties and are looking to save for your retirement then you should choose to invest with conservative investments maybe a moderate style of investing. But if you are looking for fast money maybe to buy a home in the next year then you should look at an aggressive style of investment.
Someone choosing conservative investments wants to get back their initial investment at the end, so say they invested $6000 they want to be sure of getting that initial money back. This type of investor would commonly choose to invest in stocks and bonds and short term money market accounts.
It is common for conservative investors to use interest earning savings accounts. Moderate investors will choose similar investments to a conservative investor, but will also use some of their funds for higher risk investments. Generally moderate investors split their funds and use 50% for safer conservative investments and the remaining 50% for riskier investments.
Aggressive investors are much more willing to take a lot more risks with their money than any other investor, and will invest larger sums of money in to riskier ventures in the hope that they will make a larger return either over time or in a very short time period. With aggressive investors it is common for them to have all, or most of their money tied up in the stock market.
So your risk tolerance really does determine your investing style as does your financial goals. You must always research for any type of investment style you may choose, and seek advice from a professional financial planner. Do your homework and never invest until you have all the information!
