Investor Types - What Type of Investor are You

By: Mika Hamilton

There are many different types of investors in the stock market. Some people are bearish, believing that the market is going to fall, while others are bullish, believing that the market is about to rise. Within both categorizations, investors can be classified into the following types: Aggressive, Moderately Aggressive, Moderately Conservative, and Conservative. Which type are you?

Aggressive investors tend to concentrate on equity investments such as individual stocks and mutual funds. They are open to more risk, willing to see large short term swings in market performance on an annualized basis. They aim for large growth in the market, often above what the long term market performance has shown. They are also seeking quick growth in their portfolio, and some are even called "Day Traders." The recommendation for this investor is to have a minimum timeframe of 15 years before they will need their principal investment, to allow for variations in the market to average out. The average rates of return that an aggressive investor expects to see is between 12-14%, a few percentage points above the long term stock market average.

Moderately Aggressive investors also seek longer term investment gains through a mix of equity investments. While many of the investments are the same, the overall portfolio contains some more conservative investments, creating a portfolio that builds wealth with less annual swings in the portfolio's performance. An investor with a time frame of between 6-10+ years is most appropriate for this type of portfolio and the average level of return that an investor can expect to receive is between 10-11% annually. This annual investment return represents the stock market's long term average growth over the past several decades.

Moderately Conservative investors are much less willing to accept variations in their portfolio's balance. Individuals that are going to need their money within 3-6 years are most suitable for this investment strategy, or those looking for a regular income stream. A moderately conservative portfolio is often more weighted to individual bonds or bond mutual funds, and can expect to earn between 6-8% in annual growth. Moderately Conservative investors also typically receive income from dividends on a quarterly or annual basis from their investments.

Conservative investors are typically those with either a short term goal (less than 3 years), or those who are in retirement seeking a regular income stream. These portfolios tilt away from equity investments into more preservation investments, like real estate investment trusts (R.E.I.T.'s), individual bonds, bond funds, municipal bonds and annuities. These assets are not intended to provide great growth within the portfolio, but are designed to provide income and preserve the principal balance over the investor's estimated lifespan.

These descriptions are meant to serve as a guide as there are many different definitions of these categories throughout the international stock markets. In order to determine what type of investor you are, take a risk tolerance quiz online and consider your gut feelings about the level of risk that you are willing to accept. Whether you are aggressive, moderately aggressive, moderately conservative or conservative, you are sure to build long term wealth when investing into the stock market.

Investment
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