Are you a conservative investor? Chances are you are not. You may have some tolerance for risk, which might categorize your approach to your portfolio as moderately conservative. You may own equity investments, which true conservatives might shun, unless of course they pay dividends, in which case, you would be a value investor. One thing is certain, a conservative investor worries.

What defines a conservative investment approach?

A conservative investor looks for stability. These investments can be difficult to find as markets roil with other investors looking to find a place where it might be safe, or safer. This investor focuses on bonds and investments that pay dividends that can be considered fixed income.

Are there advantages to this approach?

Conservative investors see every other strategy as helicopter investing. If you own equities for instance, your focus might have turned from simply enjoying the run-up in equity prices in 2013 to one of concern as January of 2014 trimmed a huge chunk of those gains. Each downtick has equity investors wondering whether to sell some profits, sell everything, or ride the bull market a little further. Conservatives simply sit back and watch. They are comfortable with low risk, fewer chances of loss, and of course, less time spent monitoring their investment choices.

Are there disadvantages to this approach?

Conservative investors must be comfortable with a low rate of return. That return on their investments might be single digits compared to the return that an equity investor might have experienced in 2013, where the markets took the average investor to dizzying double digits. This approach does not seek to make money by taking advantage of what the markets seem to be offering. Instead, they seek slow, steady, and predictable gains.

Are there certain factors that enable a conservative approach?

Investors seeking to a wholly conservative approach will tend to have much more money involved than most other investors. Beginning investors may be skittish of market gyrations. But eventually, they will realize that a conservative approach at an early age will require either one approach or the other: They will need to invest considerably more or invest for a longer period of time. While understanding your own risk tolerance is important with any strategy, conservative investors see risky behavior in every other market participant as validation of their approach.

Where do conservative investor invest?

Conservative investors will seek higher quality bonds or fixed income investments. While the conservative investor may have a lot more money involved than the average investor, most of us should opt for this investment using mutual funds.

Most advice offered to investors suggests a combination of several approaches. You may have a more equity focused approach in your company sponsored retirement plan but hold more conservative investments outside of those accounts. You may opt for a balanced approach that is more heavily skewed toward bond or fixed income mutual funds.

The bottom line is diversity. Invest across different asset classes, do so at a steady pace over the long-term, and lastly, use the lowest cost approach possible. As near what you might consider enough money, congratulate yourself. At that point, you will, almost by default, become a conservative investor.