Investment Styles

The three investment styles are conservative, moderate, and aggressive.

Again, your risk tolerance and investment goals come into play, when choosing the right investment style. If for instance, you realize that you have a very low risk tolerance, naturally, your investment style will definitely be conservative, or at best, moderate. However, for those with a high risk tolerance, moderate or aggressive investment might be the best choice.

Also, your investment goals could determine your investment style, especially when you believe that risk tolerance does not constitute a determining factor. If for instance your investment is basically targeted at saving for retirement and you are still in your twenties. Obviously, there is nothing to rush about. Conservative or moderate investment could be the right choice. However, if you are concerned with raising money to buy a house in a year or two, you are definitely going to be an aggressive investor.

Let's look at these styles of investment. Conservative investment, just like the name implies basically involved gradually building profit over a long time. Here, the major concern is ensuring that the initial deposit is recovered. In other words, when a conservative investor invests $10,000, he wants to be sure that he will get his $10,000 back, no matter what happens. Conservative investment usually involves investing in common stocks and bonds, interest earning savings account and short term money market accounts.

A moderate investor has a higher tolerance for risk. While a moderate investor will more likely invest like a conservative investor, he is also more likely to reserve a portion of his investment funds for higher risk investments. So, let's say a moderate investor has $10,000 to invest, he is more likely to invest $5,000-$6,000 conservatively, and the remaining sum in higher risk investments.

An aggressive investor understands the rules of the game quite well. He is willing to stake his money to get back some quick profit or lose it all. So, he is capable of taking risks that the average investor won't dare take. Although, aggressive investors do invest conservatively too, however, they stake greater amounts of their money in riskier ventures, usually in the hope of achieving larger returns immediately or over a period of time.

As you can see, your investment patterns largely depend on your goals and tolerance for risk. But it is pertinent to state that whatever investment style or plan you choose, it is a good idea to get yourself acquainted with all the facts and risks involved with the investment. Knowledge makes for better and safer investment.