Knowing what kind of investor you are and how much risk you are willing to take is important in setting up the right portfolio that works for you and your risk tolerance. There's no good in owning high risk holdings that keep you up all night stressing. When I say investor, that doesn't just refer to buying and selling stocks. That can mean bonds, mutual funds, Exchange Traded Funds (ETFs), or real estate to name some examples.
Overall, there are three types of investing strategies:
Income: Primary focus is on blue chip steady companies that consistently provide value to their shareholders in the form of a dividend. This can also include marketable securities such as bonds where your principal is guaranteed upon maturity but you earn the interest through the bond term. Earning rental income on an investment property can be considered another example of income investing. Income investing is typically used for very long term investing (> 10 years) and is considered perhaps "less risky" than growth or value investing.
Growth: Primary focus is buying companies that are in their growth phase and rapidly raising capital (through issuing debt or issuing more shares) to increase their earnings and revenues considerably year after year. These tend to be more volatile stocks, and may be perceived to be more "risky", but holdings like these will return value to their shareholders through price appreciation (or simply their stock increasing) and investing any leftover retained earnings back into the company instead of in the form of a dividend. Growth investing usually involves holding stocks until they evolve into large companies that simply can't grow at the rates they could when they were much smaller. Typically, growth investing in any one stock is usually more short term (1 to 5 years).
Value: Primary focus is on companies that are deemed to have low valuations based on their current earnings and projected earnings for the following year. They can be seen as undervalued based on their historical valuations over previous years. These can consist of a wide range of small cap companies (companies with market capitalization less than $1B) to large cap companies (market capitalization greater than $10B). I'll save the specifics on methods to value a stock for a future lesson. Like income investing, value investing can be done on a "buy and hold" approach over the long term as well (> 10 years) which Buffet has proven to be effective over the last 30 years (see Lesson 6 for more!). However, value investing could be done over the short term as well; buying at low points of under valuation and selling at high times of overbuying and over valuation.
Typically when financial institutions offer mutual funds to their customers, they have the funds broken down into varying degrees of "risk". What you will typically see is that a low risk portfolio will have a large portion of government bonds and other ETFs, with a low portion of individual stocks. On the other hand, products labelled as "high risk" will simply have a higher allocation of the portfolio to individual stocks and a smaller amount dedicated to bonds and other fixed income securities.
There is no one better strategy over the other, but there is always a better strategy or strategy mix that works for each individual depending on one's risk tolerance, stage in life, length of investment term, and many other "life" metrics specific to that individual. Be sure of which investing style better suits your needs so you can be educated and prepared when speaking to your financial advisor about what product works best for you, or when setting up your own investment portfolio.