Choose your investment style

Each investor is different and has its own preferences when it comes to putting his/her hard earned money into the stock market. The common investment styles noticed are:

Hoarders

Hoarders show an inclination towards short term transactions while preferring to allow the fund managers take their decisions. They usually tend to go for money market funds, fixed income instruments and certificate of deposit (CDs) because of low risk profile of these funds. Whenever they are needed to pay more attention, they defer the decision making activities to fund managers.

Hoarders, however, face the risk of opportunity costs due to low returns provided by the funds they invest in. They may also lose the principal itself if problems arise with the institutions they have invested through. These risks can, however, be avoided if they select insured investment vehicles.

Traders

Traders also go for trades with a short term horizon in the mind but they are more hands on with their approach. They choose riskier assets, though they buy and sell frequently so that risks and rewards can be balanced. They keep their eye on every little detail related to their stocks.

The traders, due to their very styles, may exit their positions earlier than required. They trade actively in the market, which increases their transaction costs. Their do it yourself approach also increases the chances of errors.

Allocators

Allocators invest as per a long term horizon while holding stocks for considerable time. They donÕt rely on the agents to get their information; they completely immerse themselves in the market details. Even when they are working with agents, they retain decision making with them. The allocators, however, are also prone to errors due to their hands on approach.

Providers

Providers usually go for riskier investments such as equities (that are likely to pay off in the long term) looking at the long term horizon. Providers do not believe in hands on involvement in managing their money. The decision making is therefore, left to the professionals.

The investment styles vary according to many factors such as age, experience, interest, and of course, how much money investors already have. People closer to retirement behave differently than those at the beginning of their careers.

In the end, however, it can be said, no investing style is better than others. Each of these carry their own advantages and risks, choose the one that suits you the most.