To help you choose investments more wisely, you need to know your investment style and risk tolerance. There are 3 specific investment styles and they're tied with your risk tolerance. Conservative, moderate, and aggressive are the 3 styles of investment.
If your tolerance for risk is low, then chances are your investment style is either conservative or moderate. But if your tolerance for risk is high, then you're probably a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.
If you're trying to get together funds to buy a home in a year or two then aggressive style is better but if you're saving for retirement in your early twenties, use conservative or moderate style of investing.
What conservative investors want is to maintain their initial investment. If the amount they invested was $5000, then getting back their initial $5000 is what they want. This type of investor usually invests in common stocks and bonds and short term money market accounts.
For conservative investors, an interest earning savings account is very common. A moderate investor would invest like a conservative investor but a portion of their investment funds will be used for higher risk investments. Around 50% of their investment funds are invested in safe or conservative investments while the remainder are invested in riskier investments.
Willing to take risks that other investors won't take is an aggressive investor. Higher amounts of money are invested in riskier venture, hoping to get larger returns either in a short amount of time or over time. Tied up in the stock market are nearly all of the aggressive inventors' investment funds.
Your investing style will be determined by your risk tolerance and financial goals. Regardless of the type of investment you do, it's important to carefully research that investment first. Don't invest unless you have all the facts.
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