Profile of a Moderately Aggressive Investor – Investment Personalities

This page is part of a series on investment personalities. Today we’ll hear from the moderately aggressive investor, who might describe herself this way:

I am a moderately aggressive investor. I believe that I will be rewarded for taking risks in the stock market. I know that I will lose money from time to time, but I’m willing to ride it out. My belief is this: if I hang in there, I can do better on the risky end of the risk/reward spectrum. Not only do I feel OK when the market goes down, but market downturns will not hurt me financially. I don’t need to spend my money for many years to come, so who cares if I lose money on paper?

Investments for the Moderately Aggressive

Moderately aggressive investors put most of their money in the stock market. They might have 70-80% invested in stocks (as a rough estimate) and their goal is to participate in most of what the stock market brings: the good, the bad, and the ugly. Some portion of their portfolio may be invested in bonds as a way to reduce risk slightly, and provide income to the portfolio. They might also use higher-risk bonds, such as junk bonds and bonds issued in emerging market currencies.  Finally, moderately aggressive investors should have global exposure and invest some of their money outside of their home country.

Risks for This Type of Investor

The main risk that moderately aggressive investors take is market risk. Most of their money is in the stock market, and so they will feel it when markets come down. The small portion in bonds (especially if it’s invested in riskier bonds) will do little to dampen the blow. A major risk for this type of investor is the risk of “selling low”. A moderately aggressive strategy always seems like a good idea when the markets are going up. However, if there’s a crash, it can be tempting to a sell out or reduce risk, and sometimes it’s too late. Sticking to your strategy requires nerves of steel.