Investments and Investment Strategies
We have talked about defining yourself as an investor . Depending on what kind of investor you are, there are, for the most part, three different types of investments or categories within which you can invest. Essentially they include stocks, bonds, and cash. Seems pretty simple, right? Well, it certainly is not. My advice is to proceed with caution, investing as in any other technique you develop to accomplish a specific purpose, especially one of achieving financial freedom or amassing significant wealth, can easily become very complex and risky. But, a lot can be accomplished by educating yourself, expanding your knowledge and understanding through solid research, and last but not least, by learning from your mistakes and continually honing and refining your strategy and system.
Fortunately, the amount of information and knowledge that you’ll need to equip yourself with is directly associated with the sort of investor you are. As there are basically three types of investments as stated above, there are also primarily three types of investors. They include the conservative, moderate, and aggressive. And as with the varying combinations of investments your can make within the financial markets, there are also a broad spectrum of each type of investor within each of the three basics.
The conservative investor is often an investor who may be a bit older and have less time to play their hand in the financial markets before retirement. They may also just be conservative by nature and not readily willing to part with their hard earned dollar and seek to achieve low but consistent returns on their investments. They tend to place their money in interest bearing savings or money market accounts, Treasury bills, or Certificates of Deposit. These investments are representative of the safest investments as they are low risk and grow over a long period of time.
Moderate investors tend to be a little younger than the conservative investor and likely have a bit more time to accomplish their specific financial goals. They tend to be somewhat more diverse than the conservative investor and invest in cash, bonds and may dabble in the stock market. Moderate investing is a cadre of low to moderate risk investment within the cash and bond market and may also include investments in real estate, providing the investment is of relatively low risk.
Aggressive investors tend to be young and commonly do most of their investing in the stock and financial markets within specialized, highly unpredictable sectors and may even invest significant portions of their portfolio in foreign markets. All can be highly volatile and extremely risky; however, these investments tend to be the ones that provide the greatest, sometimes even astounding, returns on investment.
Before you begin investing your hard earned money, it’s important to clearly analyze and understand your particular financial position and consider what your goals are. You want to ensure that you possess a thorough understanding of your investment style and strategy and develop a plan that fits within that framework. Lastly, knowledge is power. The more you know and understand about the particular investments and their associated risks, the better off you will be when it comes to meeting your long range financial goals.