Risk Tolerance And Investment Styles
Being aware of what your risk tolerance and investment style are will help you in selecting investments more wisely. While there are alot of various kinds of investments that anyone can make, there are actually only three particular investment styles – and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.
Naturally, if you see that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you would most plausible be a moderate or aggressive investor. At the same time, your fiscal goals will also determine what style of investing you use.
If you are setting aside money for retirement in your early twenties, you should use a conservative or moderate style of investing – but if you are trying to get the funds together to get a home in the next year or two, you should use an aggressive style.
Conservative investors wish to maintain their original investment. In other words, if they invest $5000, they would like to be sure that they will get their original $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 well-known by conservative investors. A moderate investor oftentimes invests much like a conservative investor, but will use a part of their investment funds for greater risk investments. Most moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.
An aggressive investor is willing to accept risks that other investors won’t take. They invest greater amounts of money in riskier ventures hoping to achieve greater 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, deciding what type of investing you will use will be decided by your fiscal objectives and your risk tolerance. No matter what type of investing you do, but, you should carefully explore that investment. Never invest without having all of the facts!
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