To achieve success in investing, you first need to set the kind of goals you wish to achieve. Then you set out to achieve your goals leading to success. First you need to understand your requirements and risk tolerance. Are you a low risk or medium risk or high risk investor?
Safe trader – A low risk investor’s goal would be to protect an investment capital as well as generating modest returns on them. They will invest into fixed income securities and defensive shares.
Low to medium risk investor – The medium risk investor can partly make investments in risk-free assets like government securities, bank deposits and the rest of the money on higher risk assets like shares.
High risk investor – A high risk investor does not invest into low return schemes like bonds, fixed deposits but invest into high quality growth stocks in hopes to achieve high returns.
When investing into stocks, you need to understand the sector and the business you’re investing into. If you are a low risk investor, you would want to buy into the consumption or pharmaceutical sectors which are safe sectors because even in a recession, people will continue to buy daily use items and medicines too.
Medium risk investors might opt for a few defensive market sectors such as consumption as well as pharmaceuticals and may also make investments in more risky industries such as autos along with banking institutions that are extremely unpredictable. Do a good investment planning in which you’re nicely balanced with your stock portfolio by spreading out your risk.
High risk investors don’t go for defensive stocks but enter into high growth names like banking, auto and oil and gas kind of sectors. These sectors have high risk but equally high rewarding as well. So if you have the knowledge to take risks, you can work your way around and make a lot of money in stocks. All you need to do is to choose your risk appetite and invest wisely.