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Risky Business & Style: What Kind Of Investor Are You?

Mar 24, 2008
Investments, whether stocks, bonds, annuities, etc., can be selected wisely once you have determined what your risk tolerance is and the style of investment that you wish to make. Even though there are many different types of investments that you can choose from, there are in actual fact only three specific styles which tie in with your risk tolerance. These three styles include conservative, moderate, and aggressive.

If you find that your risk tolerance is low, then your investment style will most likely be conservative or moderate. If your risk tolerance is high, then your style will be moderate or aggressive. You financial goals will help you to determine what style of investing to use.

For example, if you are in your early twenties and are saving for your retirement, then you should use a conservative or moderate style of investing. However, if you wish to get funds together in order to purchase a home in the next year or two, then you will need to undertake a more aggressive style of investing.

Conservative investors wish to maintain their initial investments. For example, if they invest $5000, they want to be certain that $5000 is what they receive back. Common stocks, bonds and short term money market accounts are normally invested in by this sort of investor.

For conservative investors, it is very common for them to invest in an interest earning savings account. A moderate investor generally invests much like a conservative investor, using a certain amount of their investment funds for higher risk investments. A majority of moderate investors invest 50% of their investment funds in safe or conservative investments, and then proceed to invest the remaining funds in riskier investments.

Only an aggressive investor is more than willing to risk investing in other areas that others would not generally touch. Higher amounts of money are invested by aggressive investors in riskier ventures, hoping to achieve larger returns, whether it's over a longer period of time or in the short term. It is very often a case that aggressive investors have all, or most, of their investments funds tied up in the stock market.

Once again, your financial goals and risk tolerance will determine what style of investing you will use. Regardless of what type of investing you do, it is always essential that you fully research that investment. Under no circumstances should you make an investment without being aware of all of the facts.

It's a good idea no matter what your investment style, to find a system that has worked for other investors or traders - if they'll let you in on their secrets. You don't have to re-invent the wheel with your investment strategies. Read. Subscribe to newsletters, and try some systems that allow you free trial periods. Find a proven method or two, stay the course, and your investment style will pay off for you.
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