What Type of Investor are You?
Before you decide where to invest in, you should first determine the answer to the question, ‘What type of investor are you?’ It would be easier to formulate and implement an appropriate investment strategy if you understand yourself and your personal circumstances. Once you fully understand yourself and the type of investor you are, you can easily and effectively determine the type of investments that you should take.
How should you categorize yourself in terms of investing? There are many acceptable ways to do so. Here are two recommended factors to consider.
Logically, younger investors have a greater ability to recover from possible short-term investment losses. Investors aged 30 years old or younger could count on more jobs and opportunities to accumulate wealth. Thus, they may have a higher tolerance for risk in investing, notwithstanding their natural aggressiveness and optimism.
On the other side of the spectrum, much older investors or those close to retirement age (50 years old and older) should be more careful and should stick to conservative investments. They may not possess the same work opportunities to offset losses through employment income, and would be better off investing in safer, moderate earning assets.
Source and size of wealth
How did you accumulate your wealth? It can significantly affect your ability and willingness to face risks. Entrepreneurs are generally used to risk taking because they have been exposed to the ups and downs of the business decision making processes. If you use your lifelong savings or inheritance, you naturally would take more conservative options when it comes to investing. You may naturally demonstrate lower tolerance to risk taking.
Moreover, your perception of wealth could also be a significant influence on your investing behavior. In general, investors who consider their wealth as small or those who consider themselves poor are more inclined to be protective of their investments.
Overall, choosing and taking the wrong investment can be very costly. It can greatly affect your financial and emotional well-being. Thus, a better understanding of your capacity and expectations would serve as a reliable guide when making and keeping investments. Be sure to determine the type of investor you are before investing.
So, what type of investor are you?
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