Your Investment Style Makes You the Type of Investor You Are Articles | Investing

By: Guy Starbuck

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.