Investment Philosophy is Only for Phylosophers?

“Investment” sounds like such an intimidating word and investing is no less daunting as a hobby. Wait, hobby? Yes, believe it or not, investing is not just a source of income for number-crunchers; it is a way of life for risk-takers and conservative investors alike. But, if there's one thing that all these investors have in common, it's an investment philosophy.

Since investing is an activity that involves a certain amount of risk, experienced investors say that it's important to have a philosophy or mindset when it comes to investing. Following a specific philosophy will help newbie investors determine where to put their money and how much they should invest in each venture.

There are investors who prefer high-risk portfolios because they also promise great returns. These investors like putting their capital into emerging industries or newly-formed companies, which show a high potential for growth. The advantage with this kind of investment is that one can put in a small amount of capital and expect it to double in a short amount of time; that is, if the business being invested on becomes successful enough to pay back its investors.

On the other hand, there are investors who would like to stay on the safe side by buying the stocks of more established companies. The advantage of this kind of approach is quite obvious, since there's a lesser chance of losing money with this kind of portfolio than with a high-risk one. Payback is guaranteed, although those who were hoping for bigger returns might not be so content with the earnings ratio.

There also investors who take a chance on lower-priced stocks, hoping to pull them out of the stock market limbo by buying more of them to increase their value. This wouldn't be the most advisable approach for newbie investors, though, because, although the paid-in capital is much lower, there is also a greater risk that they will not get their money back. It's important for investors who are looking to invest in this kind of market to do a background check on these low-value stocks and make sure that they're not financing some shady company. But, if the stocks are legitimate and other investors are encouraged to buy more of them, their value will surely increase and those who put their trust in them first will be greatly rewarded.

An investor can adopt any one or a combination of these philosophies. One thing is clear, though: investment is not just for the brave, nor is it for dummies. Anyone can be an investment phylopher with the right approach and a whole lot of patience.