Video Professor

What is your investment style?

Getting to know you.

Has this ever happened to you? You’re stuck at a social gathering with some Blow-Hard who can’t wait to tell you about his latest killing in the stock market. You nod politely as you ease your way over to the chips and dip. As you dip, the Stock-Market Dabbler corners you. She is a very nice person, but isn’t a serious investor.

But she wants to be. She just isn’t sure what she wants to do with her investments. She wants you to give her advice. You want a drink. While the bartender pours you a soft drink, he tells you (on the sly) that there is a small company that is about to go public. He has put every cent of his savings into this company and suggests that you do the same. But you have to act fast. If you wait until the fizz of your cola is flat, this once-in-a-lifetime opportunity will be gone. You swig down your drink and get the heck out of there, holding onto your checkbook so hard that your knuckles are white.

When you finally make it home and are comfortable sitting in front of your favorite late night show, you just might start wondering about your own investments. Are you financially where you want to be? If not, how do you get there?

Let’s Start at the Very Beginning

If you were unfamiliar with securities and investments, it would be wise to do some research prior to setting your investment style in stone. Call or visit a stockbroker. Read the financial pages of the newspaper and weekly financial magazines. Your computer grants you access to all kinds of financial and investment resources. If you are not computer savvy, free computer lessons and free computer online training is available to you 24 hours a day. After only one online computer class, you’ll feel comfortable enough to learn how to use the Internet with a free Internet lesson. Then you will be able to log onto the Internet and visit investment sites. If you are interested in investing in particular companies, visit their sites to familiarize yourself with their products, boards of directors, financial strategies, and much more. 

If you like your stockbroker, use his/her knowledge to implement your investment style. If you prefer to keep your strategizing to yourself, learn online investing. After you learn how to invest online, stay true to your investment objectives and goals when you invest.

If you are interested in entering chatrooms to discuss your investment strategies, participate with personal safety in mind. Do not disclose personal information. Chatrooms can be valuable resources, but they are also hunting grounds for predators who are seeking the personal financial information of online visitors to steal identities or wreak financial havoc on unsuspecting victims.

After all of your time and research, you have successfully determined your financial objectives and goals. So, what is your investment style?

You’ve got to have style

When formulating financial objectives and goals, you need to assess your finances and investment options in order to improve your financial outlook. Then you must be honest with yourself about your tolerance for risk. If you avoid gambling on any level, that will have a profound impact on your investment style.

Your investment time frame is also a consideration. Do you plan to be working in ten years? Twenty years? Are you putting children through college? When will they graduate? Answering these questions will help you determine how aggressive or conservative your investment strategies can be.

There are basically three investment styles: Income, Value, and Growth.

Income Style is just that. Your investments provide a source of income. The amount might be modest, but it can be slotted into your budget as regular income. Stable earnings can be achieved by investing in government savings bonds and money market mutual funds. The risks are minimal, but so are the chances of substantial growth. This style does not lend itself to making a “killing” in the market. This style tends to be adopted by people who are within retirement age. Taking big risks with your nest egg is not usually seen as a prudent investment option.

Value Style is when a consumer notes that a stock is undervalued. For some reason, the current price does not fully reflect the company’s potential or assets. This style requires some homework and investigation on the part of the investor. By examining company annual reports, products, and asking a few questions (Have there been lay-offs? Has upper management been put in jail? Are there a lot of product recalls?), an investor can determine if this stock will increase in value. Of course, without a crystal ball, nobody knows for sure. However, many undervalued stocks do rise again, after time, and the investor makes a tidy profit. Risk, of course, always exists. That same company might be sued out of the blue and file for bankruptcy. Then the undervalued stock tanks, and the investor loses money.

Growth Style is putting money into stocks and other kinds of growth securities and expecting those investments to have large gains over time. It is not an in-and-out investment, because those stocks will experience ups and downs. The risk is hoping that gains outweigh losses for a sizable return. If an investor panics during a market down cycle, his/her short-term losses can be huge. The stock market is no place for Nervous Nellies.

Why not diversify?

As with your eclectic tastes in fashion and furniture, your investment style may indeed be a combo style. You may wish to gamble a bit with some aggressive growth investments, but offset those investments with more secure income securities. If you misread value investments and take a loss, it is possible that the right growth investment choices can cover those losses. Not at all sexy, but being an Even-Steven is much better than losing your shirt.

 Video Professor