Different Types of Investments Investments basically are of three sorts: stocks, bonds, and cash.
Though this may sound very simple and straightforward, hereafter it gets a bit complicated.
There are way too many types that come under the purview of each of these categories.
Each type of investment option is different from the other and you have to learn a bit about it before investing or you end up getting confused or averse to investing.
Investors too, are of three sorts: conservative, moderate, and aggressive investors.
Risk tolerance is also of two main types: high risk and low risk.
Conservative investors usually have a low risk tolerance, tend to invest in cash, and usually invest their money in mutual funds, US treasury bills, Deposit Certificates, or savings accounts, and such other things where the invested money is safe and evolves gradually over time.
Moderate investors have low or moderate risk tolerance, invest in cash or bonds, and play with the stock markets often.
They also frequently invest in real estate of low risk nature.
Aggressive investors have a high risk tolerance and usually invest in the stock market and frequently in businesses and high-risk real estate flings.
Consider an example.
An aggressive investor will purchase an old property and invest more money in to it for renovation.
He can then either lease it for more money or sell out the whole property at a profit over his initial investments.
This is a two-edged transaction and it may get you in a loss as well.
The most important thing to do before investing money is to get all the information possible on the type of investment you want to do.
Also very essential is an accurate understanding and estimation of all the risks involved.
Studying past patterns related to investments can save you at times.
There is nothing as valuable as experience.