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Types of Investors

types of investorsRisk is an important think to take care of while creating an investment portfolio.The amount of risk in the investment option is directly proportional to the rate of return of that investment option.The high amount of risk creates an opportunity for the investor to earn high rates of return.

Risk plays an important role in affecting the decision making of the investor.It affects different types of investors in different ways.Some investors like risk taking and some avoid to take risks.Following are the most important types of investors according to their risk taking behaviors.

Risk Neutral

Risk neutral is a type of investor who is not entirely concerned with the risk or rate or return on his/her investment.Alfred Winslow was the founder of this investment strategy.He used his hedge fund to effectively implement this strategy.

Risk neutral strategies are one of the most used strategies by the risk neutral investors .According to the latest statistics more than  $ 40 billion has been invested using this strategy all over the world.The investor earns profit due to difference in his/her short and long positions.

Statistics arbitrage is one of the most effective risk neutral investment strategies.It uses time series analysis to calculate accurate prices of the stock traded in the market.Two or more stocks of same price level are traded together in pairs in this type of strategy.

Equity market neutral is another very important risk neutral strategy.It is employed by creating a stock portfolio with both short and long positions.It helps the investor to diversify  risks inherent in the stock.This strategy helps the trader to hedge different types of risk such as foreign exchange risk and industry related risks etc.

Risk taker

Risk taker or risk lover is a type of investor who is only concerned about the rates of return on the investments.He/she is never afraid of taking risks while investing in stock or commodities.He/she is always ready to take high risks to earn high rates of returns on his/her investments.Risk taker investor has a very high tolerance for the risk.He/she also has a very strong desire of earning high rate of return on investments.

According to the stock market experts,aggressive investment strategy is the most suitable strategy for the risk takers.This strategy helps the investors to maximize their return on the investments by taking risks.These investment strategy is perfect for the people looking  to earn returns from their long term investment options.

Risk Averse

Risk averse is a type of investor who always selects the investment with low risk.This type of investor is always concerned with the amount of risk rather than the rate of return on the investment.A risk averse investor avoids adding high risk securities  in his/her portfolio.

Defensive investment strategies are most appropriate for the risk averse investors.They should look for investing in defensive stocks or debt instruments.Most of the analysts believe that the types of investors are interested in more safe and secure investments.They feel comfortable in investing in defensive stocks and safe investment options.The most appropriate investments for these types of investors are mutual funds,provident funds and also blue chips stocks in the stock market.

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About Emaad Qureshi