When you’re building an investment portfolio, you’ll need to decide on your strategy. In the world of investing, there are typically two strategies to use: conservative investing and aggressive investing. Understanding the difference between these two can help you determine which investment strategy is best for you.
What is conservative investing?
Conservative investing is exactly as it sounds—conservative. Someone who uses this strategy will aim to preserve their current capital over gaining more. That doesn’t mean you won’t earn more funds; it simply means that you will not be taking big risks in order to increase your funds. As such, this type of strategy has a low risk tolerance and will be more focused on lower but stable returns rather than higher but riskier returns.
In most cases, people choose a conservative investing strategy when they have a short time horizon. In other words, they have a shorter window as to when they need the money. As such, they can’t take the risks of an aggressive investing strategy.
What is aggressive investing?
If conservative investing is all about preserving what you already have, then aggressive investing is about building what you don’t already have. Aggressive investing is all about growth, even if that growth involves some dips. This type of strategy has a high risk tolerance with the understanding that even if your investments take a hit now, you can more than make up for it in the future.
As such, an aggressive investing strategy is best for those with a long time horizon. If the market is in a bad state, it’s much easier for you to recover your funds if you don’t need those funds for a long time. So, if you’re just starting to build your investment portfolio and are looking for long-term gains, then an aggressive investing strategy is the way to go.
At First State Investment Advisors, we can help you choose the right investing strategy for your particular situation. Contact us today to learn more.