Investment and Portfolio Management

Chapter 2 - Different Types of Investors

Three Different Types of Investors

1. Conservative Investors - are investors who seek stability when it comes to investing and are more
concerned with protecting their capital than increasing its value.
- they are normally willing to accept lower return sin exchange for capital
preservation associated with short-term funds.
- these investors are comfortable in accepting lower returns for a higher degree of
liquidity or
stability.
- typically, they primarily seek to minimize risk and loss of principal.
- the ones who preserve their resources and do not take risks that compromise their
equity (capital).
- losses and lack of liquidity are out of their plans.
- most are beginning investors who avoid risks and have short and medium-term
objectives.

2. Moderate Investors - value reducing risks and enhancing return equally.

- willing to accept modest risks to seek higher long-term returns.
- May endure a short-term loss of principal and lower degree of liquidity in exchange
for long-term appreciation.
- more concerned with relative yet stable growth in excess of those provided by
conservative funds. They are willing to tolerate more fluctuation sin exchange for more reasonable
returns, but are still not comfortable enough with market risk to invest their funds aggressively.
- the moderate investors, who take a slightly higher risk, are looking for a return that
is higher than the market average.
- these investors tolerate some risk but they also cherish their equity.
- they know the market a little better and diversify their objectives between (or
among) short, medium and long-term.
- their investments have a slightly higher risk than conservative investments, but as a
result, they are able to yield slightly above.
- moderate investments can have negative returns depending on the economy.

3. Aggressive Investors - value maximizing returns and are willing to accept substantial risk.
- these investors believe that maximizing long-term returns is more important than
protecting the principal.
- may endure extensive significant losses.
- Liquidity is generally not a concern to aggressive investors.
 - moredrawntohigherlevelsofriskinexchangeforhigherlevelsofcapitalgrowth. They are
comfortable with fluctuations over the shorter to medium term as long as they can achieve
their objective of substantially increasing their real capital value over the long term.
- these are the investors with the highest risk because they seek the highest possible
profitability. As they have more experience in the market, they understand that the daily
oscillations balance in the medium and long term. These investors have a higher percentage of the
wallet in variable income than moderate investors and prioritize there turn on investment.
- the aggressive investors are investing in higher-risk investment.