Everybody
has a personal style. Some people are extroverts, others
introverts. Some people are restrained, while others are
flamboyant. The same is true in investing. Investors have
their own investing styles: Some are risk takers by nature,
willing to gamble large amounts of money on highly speculative
investments. Others prefer the absolute security of cash
in the bank (or under the mattress) even if it means that
the actual buying power of their money is slowly dwindling
because of inflation.
Most people fall somewhere in between these extremes, and
are willing to assume some risk, with the expectation that
they’ll be rewarded with higher returns. The amount
of risk you’re willing to take is your investing style.
Finding your style
Your investing style stems from a variety of things: your
age, personality, personal experience, and financial circumstances
to name a few. For instance, if you’re approaching
retirement, have burdensome financial responsibilities, or
you’ve lived through major economic upheaval, such
as a massive recession or currency devaluation, chances are
you may be a more risk-averse, or conservative, investor.
On the other hand, if you’re young, earning a high
income, have few financial responsibilities, and have seen
little in the way of economic hardship, you might be inclined
to take more risk.
While there are as many investing styles as there are investors,
most people fall more or less into one of four broad categories:
conservative, moderate, aggressive, and contrarian.
