Investment Strategies, So About This Recession….

Posted November 15, 2008 by Bernz

riskPeople with a good investment strategy aren’t sweating during this bear market because they are merely going with their strategy. You’re one of the non-sweating type right? If you’re still sweating, I will have your brow dry by the end of this article. There are two things that help determine your investment strategy, your risk tolerance and your financial goals.

Financial goals

Houses, cars, kids, jobs, moving, its hard to see into the future about what you will do, but to really make your money work for you and invest your risk capital wisely, you need to have a general idea of what you want to do in the next 5 years or so.

Risk tolerance

There are a few types of stereotypes when it comes to investing. There are researchers, dare-devils, and bubble dwellers.

Researchers, risk: medium

A researcher will research every investment he/she does to excess. They won’t make a move unless they know exactly what they are doing and they know exactly how much they stand to lose. The disadvantage is that they cannot make snap decisions from which they might benefit. The advantage is clear, they are the financial know-it-alls.

Dare-Devils, risk: high

These people make the snap decisions, play the market, and usually do some form of day trading. The advantage is that their risk tolerance is very high, but they stand to lose a lot and can be very foolish in their pursuit of wealth without really taking perspective of their situation. The advantage is tremendous gains if they play their cards right.

Bubble Dwellers risk: very low

These people don’t touch anything more risker than a vanguard mutual fund or a treasury bond. These people can’t stand the thought that they might lose money. These people will choose very safe investments and sometimes for good reason. If their income is not that high and they don’t have a lot of money to lose they will choose investments that will favor them very well and that will grow slowly over time with a small amount of risk. Their disadvantage is small return, even over time, and their over-cautiousness deprives them of good returns. The advantage is that they rarely lose money.

Decide which of the three that you are and that will help you decide an investment strategy. Then speak with your financial advisor or other professional about what investments are good for you. Also, if you are doing your own finances always read the prospectus on the mutual fund or stock you are considering.


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