Investing 101 – Knowing Yourself

Investing 101 – Knowing Yourself

 

Before you set out to ask yourself what type investment you should pursue, you need to ask yourself: what kind of investor am I? 

 

This is an extremely important question because every person is different and every investor is unique.  The level of risk that you’ll be able to tolerate, the amount of gain that you are willing to pursue and the different combinations of investments that you can manage, depend greatly on the type of investor you are. 

 

The more you get to understand the type of investor that you are, the easier it will be and for you to choose the right investment for yourself. 

 

What Is Your Age? 

 

It is generally agreed that a young investor is likely to recover from a huge loss than an older investor.  This means that, a younger investor will be better able to tolerate fluctuations in investment, much better than an older one. 

 

On the other hand, someone who is older, say someone who is over 50 years of age, should be more conservative when it comes to approaching investments.  He should not take investments that are too risky.  This is because it is more unlikely for him to recover from a loss than a younger investor. 

 

How And Where Did You Get Your Wealth?

 

The other thing that will determine the type of investor that you are is the place where you got your wealth and how you got it.  Someone who got his wealth through land speculation, selling off risky assets, and engaging in stock exchange trading at an early age is a person would be willing to tolerate risk.  On the other hand someone who got his wealth through conservative spending and put in a lot of his wealth in savings, is not going to tolerate risk very easily.  Such a person will tend to be conservative when it comes to choosing investments. 

 

Your Attitude Towards Wealth

 

If you feel that your wealth is too small and that you cannot afford to lose it, then you’re going to be a very conservative investor.  On the other hand, if you believe that you can lose part of your wealth and still live comfortably, then you are likely to be a risky investor. 

 

It is important that you consider the kind of investor you are because it is not a simple decision.  This is not the decision of going to a supermarket and picking the best brand of crisps; not at all. It is about making a decision that will determine your quality of life.

 

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