One of the most principal tenet for investment returns is that they are related to the risk you are willing to assume. Higher the risk, higher the returns. Thus it is of paramount importance that you rate your personal risk profile before embarking on any investment plans. You need to explore your feelings, attitude and approach to money to work out an effective financial strategy. You are more likely to follow a plan of action that suits your changing needs and preferences. Investors are generally classified into five categories:
Conservative Investor: Risk must be low and willing to accept lower returns to preserve capital.
Cautious Investor: Risk must be low but seek a better than basic returns.
Prudent Investor: Willing to accept calculated risk that will cope with the effects of inflation and tax.
Assertive Investor: Accepts higher risk for capital growth.
Aggressive Investor: Accepts highest risk for higher long term equity gain.
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