There are three different kinds of investments: stocks, bonds, and cash. Unfortunately, it gets very complicated from there, because each type of investment has numerous types of investments that fall under it.
There is quite a bit to learn about each different investment type. For those who know little or nothing about investing the stock market can be a big scary place. The amount of information that you need has a direct relation to the type of investor that you are. There are three types of investors: conservative, moderate, and aggressive. The different types of investments cater to the two levels of risk tolerance: high risk and low risk.
Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, mutual funds, money market accounts, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are low risk investments.
Moderate investors usually invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Also they invest in real estate, providing that it is low risk real estate.
Aggressive investors commonly do most of their investing in the stock market. They also tend to invest in business ventures as well as 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. They expect to be able to rent the apartments out for more money than the apartments are currently worth – or to sell the entire property for a profit on their initial investments. In some cases, this works out just fine.
It is very important that you learn more about the different types of investments, before you start investing and what those investments can do for you. Pay attention to past trends. History repeat itself, and investors know this first hand!
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