Aggressive vs. Conservative Investors

by guestcontributor on May 20, 2011

It sometimes seems like there are almost as many ways to invest as there are people looking to make their money work for them.  You might decide to place your excess income in retirement accounts like a 401K or Roth IRA.  Or you may purchase housing and rent it out to pay the mortgage until you can turn around and sell it for a profit.  You could certainly put money into stocks and bonds and many people choose to back friends or family members in their business ventures so they don’t have to get a bank loan.  Even a savings account is a form of investment.  In fact, the only way you wouldn’t be investing your money is if you decided to roll it up, stick it in a plastic bag, and hide it in the freezer or toilet tank.  But no matter what you choose to do with your money while you’re not using it, there are really only two types of investment strategies: aggressive and conservative.

For the average individual, aggressive investing often amounts to making unwise decisions about where to put their money, while a conservative strategy leaves them earning practically nothing.  But if you decide that you want to hire a professional to invest your money for you, the difference between aggressive and conservative placement of funds could mean having enough money to retire versus paying off your house in the next five years (also depending on how much you choose to invest).  Of course, there’s still the very real possibility that you could lose your shirt in the process, especially if you hire someone who has no idea what they’re doing.  For this reason, it is extremely important that you understand the fundamental differences between aggressive and conservative investors.

The former will likely want to place the lion’s share of your money in higher-risk ventures (stocks that aren’t proven, but are predicted to show a significant upward trend, for example) as well as moving your funds frequently (buying and selling on a daily basis).  This can be extremely exciting, especially if you see rapid growth, but they don’t call it risky for nothing.  Consider that you are allowing this person to play a game of poker with your money.  He might call himself Daniel Negreanu, but that doesn’t mean he’s going to win every hand (even though he’s a pro).  So if you’re not prepared to lose, you probably don’t want to choose this avenue of investment.

Conservative investors are just the opposite.  They are by no means meek, and they will certainly advise you on the ways to make money as quickly as possible with the least amount of risk, but they are definitely less willing to gamble away your money on a hunch or sketchy intel.  In short, they are more interested in letting your money sit for a while and earn slowly.  They might even put a small portion of your funds into higher-risk ventures if there is a good reason, but for the most part they’ll keep your investments in bonds, mutual funds, and other low-risk stocks.  You simply have to decide if slow and steady wins the race, or if it’s better to burn out than fade away.  Then you’ll have your answer as to whether aggressive or conservative investment is right for you.

Amy Givens writes for Totally Money where you can find information on financial products and browse through important information like cheap life insurance.

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