This is the third post in Your Ultimate Guide to Investing for Beginners. To read all posts in order, start with What is Investing? then continue reading the rest of the series on this page.

One of the steps to proper investing is to know what type of investor you are before you start investing. Even though all investors are trying to make money, each one comes from diverse backgrounds and has different needs. So, it follows that specific investment options and methods are suitable for certain types of investors.

Conservative, Moderate or Aggressive?

What Type of Investor Are You? To find out more about your investment style, take a few minutes to complete our Investor Profile Questionnaire. It is simple and easy, and it will help you learn what kind of investment strategy best suits you. There are no “good” or “bad” answers on this test: just answers that are closest to how you feel. Pick the answer that most closely reflects your preferences, so you can find the solutions that suit your needs.

Are you Conservative, looking at safe options for the long run?

Maybe Moderate is more your style, looking for a balance between security and good returns?

Or are you Aggressive, focused on change and growth?

Our Investor Profile Questionnaire can help you identify what style is most like you.

Your investment profile will define the type of investor you are. Various factors like your age, financial condition, investment goals and most importantly, how much risk you feel comfortable taking or can afford to take.

Click HERE to take the What Type of Investor Are You? Questionnaire

What is Risk (Tolerance)?

Risk or risk taking appetite is simply put, the amount you can afford to lose. It is a vital element in defining your investment profile. The more risk you can take, the higher the potential returns you might make from your investments.

Generally, risk is normally associated with age. A young investor can afford to invest in high-risk-high-potential markets, but that might not be the case with an elderly person, especially one who is nearing retirement.

For example: A 60-year-old widow living off of her retirement is far more interested in preserving the value of investments than a 30-year-old sales executive would be. Because the widow needs income from her investments to survive, she cannot risk losing her investment. The young executive, on the other hand, has time on his or her side so he or she can afford to be more aggressive in his or her investing strategies.

Your financial goals also defines how much risk you are willing to take. As a general rule, the shorter your time horizon, the more conservative you should be. For example, if you are saving towards a home deposit or a holiday in the next twelve months, the type of investment options you may be considering will be different to those that are suited to building long-term savings for an education fund or retirement.

Peter Lynch, one of the greatest investors of all time, has said that the “key organ for investing is the stomach, not the brain”. Meaning, you need to know how much volatility you can stand to see in your investments. I guess there is some truth to an old investing saying: “You’ve taken on too much risk when you can’t sleep at night because you are worrying about your investments.”

{Go to the Next Post: How Should I Invest My Money?}