What type of investor are you ?
There are a few types of investing styles when investing in stocks I would like to mention and highlight. Of course there are many more but I will share with you the ones that I am familiar with and have experienced.
One can argue that there are many different styles of investing to their liking. When it all comes down to it, the way you invest is based upon your life’s situation. I want to highlight a few here just to babble a bit.
First of all I want to identify what investing styles are exactly. Investing style refers to your overall method of operation of how you plan to profit from what you invest in. Many folks just want to jump in to investing and with good reason. You want to make a profit, and how are you going to learn if you don’t have any? You have to start somewhere and gain experience right? Well when you start off if you can identify or stay conscience of what works for you this will help you in formulating your investment strategy and plan and will help you stay on track with what you want to invest in. When you keep your investing style in mind it will give you proper perspective when you start learning and gaining more experience, thus it will help you to navigate and overstand the many investment vehicles offered in the finance industry today.
Active investors-
Active investing requires a high tolerance for risk. If you are a person who is really passionate about investing and this is one of your main sources of income then this is a style you may want to adopt. When you actively invest you tend be concerned with the present market conditions and how you can profit from a confluence of factors. In other words you are seeking short term profits in a minimal time period. To be an active investor you have to continuously monitor your investments and on top of that keep up with the market conditions, political influence news, etc. I tried doing this when I first started investing and was in for rude awakening when I had to do my taxes. When you actively invest like this not only do you have to keep up with all of the conditions I just listed but you also have to strategize when it comes to taxes.
An example of an active investment is being a day trader. In my opinion there is nothing wrong with active investing so long as you are passionate, have a lot of time and it is your main source of income.
Passive investing-
This style of investing requires that you set it and kind of forget it. If you don’t want to monitor markets and keep up with influences and market factors on a constant basis but you still want to be in the investing game then this style may be for you. When you passively invest you tend to be able to track your investments in a more structured way like portfolios and indexes of stocks, mutual funds or whatever investment vehicle you may choose. This style reduces risks and creates tax efficiency because you are not constantly trading and creating capital gains taxes as much.
I can personally dig this style. I have incorporated this style into my blended style of passive and growth which is my next topic.
Growth investing-
When you identify investments of companies that have exhibited historical and consistent growth, this is identified as growth investing. Growth investing consists of investing in companies with proven track record of profits. Companies like Google or Amazon are companies that have exhibited growth though out the years from the time they were first IPO’d.
My style of blending both growth and passive is where I’m at. For me personally I don’t have the devoted time to sit and track all investments on a daily basis, nor do I want to be doing that. I do however want to be an investor and make profits as well as be strategically tax efficient at the same time
Regardless of the style of investor you are it is important that you identify your own personal type and stick with it. If you are Black American always incorporate black economics strategically into all investing.