Everyone has its own preference when it comes to investment. Investors are categorized into three types: The conservative, moderate and the aggressive types.
By knowing of what your tolerance risk and investment approach shall be, that enable you to choose the kind of investments that yourself is taking in more wisely.
While there are many and different types of investments that you can make money, there are three specific investment approaches and the same are tied in with risk tolerance of how far you can go to take that risk in your investment..
Naturally, if you find yourself at a low tolerance for risk, your investment approach shall most likely be a conservative one or a moderate at best. If you have a high tolerance for risk, you shall most likely be a moderate or aggressive investor. At the same time, your financial goals shall also determine what approach of investing you shall be needing or using.
If let’s say you are saving for retirement at your early twenties, you should use a conservative or moderate approach in investing – but if you are trying to get together the funds to buy a home in the next year or two, you would rather use an aggressive style of the same.
a) Conservative investors, are those who want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts. An interest earning savings account is very a common investment for conservative investors.
b) A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.
c) An aggressive investor is willing to take risks where other investors fail to tread? They invest higher amounts of money in riskier ventures in the hope of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.
Again, in determining the approach that you shall employ in your investments ventures, is however dependent by your financial goals and your risk tolerance. No matter what investment you do, you should make a market research of that investment. Never invest without having all of the facts with you as your bankable reference in decision making.
