Being familiar and sticking to your own style of investing
will help you make more methodical choices instead of taking unnecessary and
uncalculated risks. It really boils down to three different styles of investing
and those styles describe your risk tolerance. The three investment styles are
conservative, moderate, and aggressive.
If your risk tolerance is low then you will probably be sticking around the
conservative or moderate risk investments. If you dont mind taking higher risks
then you would be an aggressive investor investing in stocks such as penny
stocks. Remember, it is also your financial goals that dictate what style of
investing you fall into. Conservative investments are usually long-term
investments with a return that accumulates over years rather than over night
like some penny stocks.
Retirement goals can be associated with conservative and moderate risk
investments. However, if you have a goal to buy a house or a car using
investment gains then youll most likely be involved in more aggressive
investments.
Those who fall in the conservative investment category usually want to maintain
the money they initially invested. This means theyre usually happy and
comfortable investing so long as the investment never dips below the money they
initially invested. Common stocks and bonds are usually preferred by this type
of investor. Also, using savings accounts or CD bank accounts can fall into the
conservative style.
If you feel you are a moderate risk investor then you will probably invest half
of your available funds into conservative investments for safety sake and then
the other half in higher risks, higher return potential investments. This
hybrid style sort of keeps you anchored while "playing" with higher
risks.
At the other end of the spectrum we have aggressive investors. These investors
will take risks that other investors are simply not willing to 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. Investing mostly or solely in penny stocks can also be described as
aggressive.
It is important to determine what style of investing you will use before taking
uncalculated risks. Your style 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!
