There are no right and wrong ways to make an investment. It all depends on the individual and how much they can afford to lose if things go wrong. Wealthy investors such as Barrons and Mctague, for instance, can take far greater risks than regular people. According to Dan Purjes, there are different ways to choose an investment strategy. For conservative investors, those include:
- Reading the main story in the New York Times to determine market fluctuations.
- Finding the final list on Wall Street at the end of a trading period to see which asset is doing best.
- Perusing an online report on which investment fund is particularly popular.
The majority of people feel they have to be conservative investors as they cannot afford to lose much. According to Dan Purjes, there are pros and cons to this.
Dan Purjes on the Pros of Being Conservative
- Some banks have specialized conservative investment accounts with higher rates of interest. This means gains are slow and small, but they are steady and often guaranteed.
- Conservative investors often take charge of their own investment decisions, which means they feel more in control. It also means that they can learn more and perhaps end up making slightly more risky investments down the road.
- Playing things safe obviously means that there are less risks, which means less money could potentially be lost.
Dan Purjes on the Cons of Being Conservative
- Because the investments are low risk, the potential yield and gain is also much lower. This means amassing a fortune often becomes impossible.
- Most conservative investment options are long term options. This means that the gains made can often not be reinvested to further grow a retirement pot, for instance.
- Because the investment options are long term and there aren’t many options out there, it is more difficult to have a truly diverse portfolio that protects the investor from market fluctuations.
Should You Be a Conservative Investor?
Whether or not a conservative investment strategy is right for you varies depending on a number of factors. Only your personal financial situation can determine what is right or wrong for you. The overall recommendation is that people invest in both conservative, long term, slow growth, secure options, and in a few more high risk, but high return assets as well. Unfortunately, not everybody is capable of doing that. If you are in a situation where you cannot afford to lose what you have got, then investing in a conservative manner is better than not investing at all.
It is also important to remember that all types of Investments are a form of gambling. There are no guarantees on the financial markets, regardless of whether you invest in a high risk asset or fund or not. Hence, it could be said that since you are taking a risk anyway, you might want to start with a small high risk option thereby potentially having more to invest in a low risk fund. The best thing to do is to speak to a financial advisor to determine what you can and cannot afford.