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Figuring out your investment style is a matter of taking a look at your approach or your strategy for investing. There are some key indicators of investment style that can be determined by how you answer the questions below. The keystone of figuring out your investment style is your tolerance of risk.
Here are some important questions to ask yourself in figuring out your own investment strategy:
* What are you seeking? a regular, consistent income from your investments or are you out to make quick profits as a result of your decision-making?
* What is your tolerance for risk?
* When will you need the money? What is your time frame?
* Do you have the investment savvy to understand the pros and cons of each investment strategy?
* How much time do you have to manage your investments?
* Do you see yourself taking advantage of Bull Markets, Bear Markets, or both?
Now that you have answered those questions, let's further develop your understanding of your investment style, that is, your approach to investing.
Do you try to identify the stocks that are a good value in that they are priced low now, but in the future, they will be worth much more?
Do you try to predict the future price of a stock based on its historical patterns?
Do you see yourself as the investor who can buy stocks and hold on to them? Do you aim for a portfolio of a large number of well-diversified stocks?
What is your attitude toward stock prices?
1) Do you pretty much believe that a stock's price is pretty much an indicator of its value?
OR
2) Do you believe that a stock price is up and down, without serious regard to its real value?.
If #1 directly above is you, you may not want stocks that are priced appreciably above or below their perceived value. You would probably apply your efforts toward a portfolio that provides returns closest to the market's return at a specified level of market risk. You would decide on what level of risk you are willing to bear and you would develop your portfolio along those lines.
Perhaps you see the market differently. Maybe you believe that the prices of some stocks can be priced significantly from their real value. You might then buy stocks well below or well above their real value.
Kinds of Investment Strategies-
Now that you have categorized your attitudes and approaches to investing, you can see how they best match up with each of the kinds of investment strategies.
Here are the three main types of investment strategies: 1.growth investing, 2. income investing, and 3. value investing.
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