Friday, December 24, 2010

What Is Your Investment Style? by Ravinder Tulsiani

What Is Your Investment Style? by Ravinder Tulsiani

Knowing what your risk tolerance and investment style are will help
you choose investments more wisely. While there are many different
types of investments that one can make, there are really only three
specific investment styles – and those three styles tie in with your
risk tolerance. The three investment styles are conservative,
moderate, and aggressive.

Naturally, if you find 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 will most likely be a
moderate or aggressive investor. At the same time, your financial
goals will also determine what style of investing you use.

If you are saving for retirement in your early twenties, you should
use a conservative or moderate style of investing – but if you are
trying to get together the funds to buy a home in the next year or
two, you would want to use an aggressive style.

Conservative investors 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 common for conservative
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.

An aggressive investor is willing to take risks that other investors
won’t take. They invest higher amounts of money in riskier ventures in
the hopes 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, determining what style of investing you will use will be
determined by your financial goals and your risk tolerance. No matter
what type of investing you do, however, you should carefully research
that investment. Never invest without having all of the facts!

About the Author: Ravinder Tulsiani is a published author who has
written about personal finance, real estate, self-help and online