Well by now we know that we can invest our money, but where do we put it for best affect? Basically there are just three different types of investing. At the top of course we have stocks market trading, and followed closely by bonds and the old favourite cash. So how simple can it be? Well unfortunately from this point on it gets very complicated. Under each of the headings I have mentioned we have a myriad of sub topics.
Now if you have about thirty years and lots of hours in your day to study, you can study all there is to know about all there is to use in your investment career. Yeah right! we can all do that can’t we? Seriously though, when your just starting out and lots of readers of this site fall into this category, the stock market is a big scary world and your first thoughts are that you will never understand it and you will probably loose your money anyway. Well of course lots of people never understand it and, yes lots of people do loose money. How you approach the market is in direct relationship to the type of investor you are.
You might find this hard to believe but just like there are three types of investing, there are just three types of investors.There are; the conservative investor, that I think of as the blue investors. The moderate investor, lets call them green and the fellow you can’t hold back, or the aggressive investor that I like to call the red investors. To go along with these people we have the two levels of risk tolerance of high and low risk.
Now everyone who starts out earning a wage or any other type of income is a conservative investor, even if they haven’t though about investing. Most of our income at first goes into an interest bearing deposit account. Then when the idea of investing takes a hold of the investing part of our brain we progress to money market and mutual funds or treasury bills and sometimes Certificate of Deposit. All the above are very safe investments. It takes them a long time to grow and they are very low risk. So if you are young enough to get started now, put some of your money into these types of investments, but allow about 20 years to get a return. If you put a little into your investment each month it will surprise you how compound interest can take hold.
Now lets talk about the green investors. You find this investor putting his money into cash and bonds. Occasionally he may dabble into the stock market but stays a moderate investor. This investor is also found in the real estate market in low risk property.
Then we have the red investors, found mostly in the higher risk stock market and business ventures as well as higher risk real estate. For instance you will find them buying older apartments and investing their money into the renovations of the property. Of course they expect to be able to lease or rent the building for more money than the investment is currently worth. Or preferably sell the property at a profit. Like all investing there is always a risk association with any investment.
As you know I am forever preaching that you learn all you can about what you are thinking of doing. History is the greatest teacher, understanding is the disciple, and all the successful investors know this from experience, with learning you can circumnavigate some of the bad experiences.
MR (ed) is the editor of http://www.expandingwealth.com educating enthusiastic stock market traders for over 4 years.
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