by James Jones

Created on: September 22, 2008   Last Updated: October 07, 2008

You're investment strategy should reflect your goals, time available and risk appetite. Throwing your pension fund on that company that your cousin Tim told you was a dead certain winner is no smarter, or dumber, than keeping your pension savings in your current account from the age of 15 to 65. Rewards come from taking risks.

Generally speaking, the more important and the closer in time the goal is (say retirement fund and your age), the less risk you should take with investments no fancy dot-com shares or other equities, just safe solid investment grade or government bonds. In fact, you should minimize your exposure to stock markets in the last five to ten years before retirement.

On the other hand if you have time and/or your investment goals are less important perhaps you are investing for fun or your pension is already safe you can take more risk as you are more likely to have the time to recoup losses incurred in a bear market during the next bull market. In fact, a twenty, thirty or forty something investor should keep most, or all, of their retirement investments in equities (or rather equity funds let the professionals pick the shares). Note the plural eggs and baskets, not eggs and a basket. Equally, someone after a big return, and willing to take the loss can afford to focus more on select shares (assuming they have an understanding of those companies) over a shorter period of time, even day-trading.

So far I've assumed we're talking mostly of pension or retirement money. There are other investments, but the same ideas hold.

Of course your investment strategy shouldn't just reflect your age or whether or not you're throwing your pension fund into the Wall Street slot machines. You need to decide how much risk you are willing to take ask yourself how much you are willing to lose. Just like roulette, investing in stock markets provides no guaranteed return and no guarantee of you money back. And, again just like roulette, if you spread yourself too thin you're returns reduce just as your risk does (although, unlike roulette, it is possible for you to win on all your bets').

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