Overall, there are three different kinds of investments. Cash, bonds, and stocks are what they are. Sounds simple, right? Not really because it gets complicated from there. That’s because there are numerous types of investments that fall under each type of investment.
There is quite a bit to learn about each different investment type. The stock market can be a big scary place for those who know little or nothing about investing. When it comes to the amount of information you need to learn, it’s directly related to the type of investor you are. There are also three types of investors: conservative, moderate, and aggressive. Also catering to the two levels of risk tolerance (high and low) are the different types of investments.
Often investing in cash is what conservative investors do. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These investments are safe and grow over a long period of time. These are also low risk investments.
Moderate investors often dabble in the stock market and invest in cash and bonds. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate.
There are higher risks with aggressive investors since most of their investing are done in the stock market. Also, they invest in business ventures and higher risk real estate. For instance, if an aggressive investor puts his or her money into an older apartment building, then invests more money renovating the property, they are running a risk. Either they sell the entire property for a profit on their initial investment or they rent the apartments out for more money than the apartments are currently worth. In some cases, this wouldn’t work but in others, it would work just fine. It’s definitely a risk.
Before you invest, first learn about the types of investments and what these investments can do for you. Pay attention to the past trends and understand the risks involved. Remember that history can repeat itself, and investors are well aware of this.
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