04 CP

Running Head: PERSONAL INVESTMENT STRATEGY 0

Personal Investment Strategy for Investor Suitability and Risk Tolerance

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Personal Investment Strategy for Investor Suitability and Risk Tolerance

The personal investment strategy in the context of investor suitability and risk tolerance means that there need to be plans that are divided into short, term, medium term, and long term goals. Reserve funds are intended only to set some capital in liquid form for unexpected expenses. This type of fund can also have a less liquid form of capital, for example, assets of any kind, for working as a contingency plan. The plans to have reserve funds, revenue sources, goals, and risks are embedded in the investment time horizon. Investment time horizon will help as a comprehensive tool to determine the needs & desires of the investor to follow the schedule of income invested, along with the level of exposure to risk and security plans. The risk tolerance needs to be created for assessing and measure the various level of risks associated with the various investments made. There are two things worth mentioning, that is, the realistic anticipation of the various possible fluctuation and the ability to control on nerves to manage such unforeseen circumstances.

Interviewee’s Risk analysis provided us with ample amount of evidence to foresee the possible portfolio investment suitable for him/her. Interviewee’s risk analysis suggest that the preference is on investment in ownership investment to reduce the risk. Being an aggressive investor, it is recommended that the growth is to be targeted. Income and asset preservation are moreover equally important with an aggregate of one third priority. Suitable investment should be followed by suitable savings. Keeping monthly expenses aside, there need to be reserve funds all the time. In order to meet short term and long term goals, the investor is supposed to decide on three levels investment, that is, ownership investment, lending investment, and cash equivalents (Lewellen, Lease, & Schlarbaum, 1977). Ownership investment includes buying property, and stocks, and business investment. It also includes containing more risk and more profit. Lending investment into Bonds & saving accounts is reasonable and the risk factor is very low and the profits are reasonable. Cash equivalents are supposed to work as risk mitigation factors.

References

Lewellen, W. G., Lease, R. C., & Schlarbaum, G. G. (1977). Patterns of investment strategy and behavior among individual investors. The Journal of Business, 50(3), 296-333.