Why It Is Important To Choose An Investment StylecuARMYrotc

All investors have different priorities. Some want to maximize their returns while others want to minimize risk. Other investors may want to eliminate the time needed to research and manage their portfolios. Investors must decide what their priorities are and choose an investing style that complements them.

Factors to Consider When Choosing an Investment Style

You need to decide what your investment goals and philosophies are before you structure your portfolio. Here are a couple of questions you want to ask yourself.

How much risk do you want to take?

You will need to decide how much risk you are comfortable taking on. You may want to be more cautious about your investment decisions as you near retirement.

Determining your risk tolerance will be the basis for most of your other investing decisions. It will determine the following components of your investing strategy:

• Which types of securities you want to invest in
• How often you want to place trades
• How much you want to diversify your portfolio
• Whether or not you want to leverage your portfolio by borrowing on the margin
• Whether or not you want to engage in short-selling

Be honest with yourself about how much risk you are comfortable with.

Do you want to manage your portfolio yourself?

Some people enjoy managing their own portfolios, while others find it to be too much of a hassle. You will need to decide whether you want to manage your portfolio yourself or let someone else handle those responsibilities.

Do you want to invest for the long-term or short-term?

Many experts advise investors to follow Warren Buffet?s model and invest for the long-term. Others try to make larger profits by trading the market.

Experts on both sides have made valid arguments as to why their approach works better. However, you will also need to consider how much time you want to commit to investing. Day traders will need to spend much more time managing their portfolios. This may be an ideal approach for you if you enjoy spending time researching and executing trades. Otherwise, you may prefer to be a long-term investor instead.

Do you want to trade individual securities or funds?

Many people prefer to create their own portfolios. They would rather choose a handful of stocks and bonds that they think will perform well. Other people would rather create a much more diversified portfolio. Investors who choose to stay diversified can choose to invest in a mutual fund or exchange traded fund (ETF). In addition to being more diversified, these funds are actively managed by professionals.

You will need to decide how diversified you want your portfolio to be and whether you want to delegate your investing decisions to someone else.

Choose an Investing Style that Works for You

Many people spend a long time debating over which is the best investment style. There really isn?t any single ?best? strategy, because everybody has different needs and priorities. You will need to choose an investment style that matches your expectations.

About the Author: Kalen is a financial management advisor and writer who talks about the investing styles of John Studzinski and other financial experts.

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