Deciding what to put in an investment portfolio in stable times is fairly easy. Knowing the risks of investing in assets of various types, the investor can easily balance them. To do this, one can combine high-risk assets with a large projected profit and low-risk assets with a modest one. However, in unstable periods, when the global architecture of economic relations is changing, this task is not so easy to solve. Payday Depot will always support you, even when changes in the financial sector shake the boat of sustainable investments.
Types of Investment Behavior
By investing liquid funds for profit, an individual takes a certain risk. As a rule, this risk can be calculated on the basis of general market trends. Since people have different attitudes toward the willingness to take risks, it is customary to distinguish several main types of investment behavior.
∑ Conservative: an individual is willing to invest in assets that will bring some profit or at least not fall in value for sure. Even if this profit is not as significant as in the case of high-risk investments, one will minimize the risks. This type of investment behavior is common to most people. It is even recommended for novice investors so that they do not make many mistakes before the experience allows them to undertake more insecure financial moves.
∑ Aggressive: Behind this not very correct name lies the desire to get the maximum profit, even if a person has to endanger his/her assets for this. This type of investment behavior is quite acceptable for people with significant funds. For them, the loss of a certain amount of assets will not result in a serious collapse. Aggressive investing can also be done by experienced investors who can easily predict market trends.
∑ Balanced: the wisest decision would be balancing assets with a high expected profit but also high uncertainty of getting it and assets with low profitability that can be received for sure. The proportion of both types may vary. The more experienced a trader, the bigger share of risky assets may be included in the portfolio. Financial specialists advise keeping a 50◊50 proportion, while others insist on 30◊70.
Which Type of Investment Behavior to Choose in Unstable Times
In unstable times, usual schemes do not work. During this period, individuals can lose even on assets whose profitability did not cause doubts in anyone. Therefore, forecasting both risks and profits becomes extremely unreliable:
∑ To make any kind of informed decision, investors are forced to resort to forecasting by weak signals.
∑ The magnitude of the error may be greater, but the probability of making a profit still remains. Therefore, aggressive investors follow this path.
∑ Conservative investors, as a rule, act differently in such a situation. They significantly reduce the level of their investments or even suspend their activities for a while so as not to lose funds.
Decision-making in unstable situations is hard. But if you donít know which path to take, divide your assets into two parts and continue your investment projects with one of them. The second should be preserved till the situation becomes more clear. That is how a balanced type of behavior works in unstable conditions.
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