When it comes to investing, every investor has their own personal tastes and preferences. Investors approaching retirement tend to be more conservative and prefer strategies with lower risks while young working adults usually have a higher risk appetite and are willing to stomach some volatility in exchange for higher returns. Whichever strategy you choose, it is important that you are comfortable with the risk it entails so that you are able to stick to your strategy and avoid making emotional decisions.
There are three key factors that determine which investment strategy is right for you.
- Risk tolerance
- Expected returns
- Effort required to implement the strategy
The first factor is your risk tolerance which is the amount of risk you are willing to take on in exchange for a return on your investment. Generally, investment strategies with higher risks should be rewarded with higher