If you are planning to enter the world of investing it is important to know what your investment style and what type of investments you would like to deal in. I expect you already know that there a multitude of different investments one can make, however, generally these fit into three main styles:
Type of investment style
Also what must be considered before investing is your risk tolerance, these can be categorized as follows:
- Low Risk
- Moderate Risk
- High Risk
A retirement plan, for example, that you should, ideally, take out early in your working life, is an example of a conservative or moderate investment style , however, if one is to accumulate funds to purchase real estate or property within a couple of years then you would employ an aggressive style of investment. Aggressive investing is generally high risk and high yield we will cover this later in the article.
If you were to employ a conservative style of investing, for example, it would mean that say you invested $6000 you would want to guarantee that you would get at least that back should you want to cash in or withdraw from that investment, so you would seek out investments that guarantee that your “stake” as it were, was safe.
An example of this kind of investment style would be a bank account that pays out interest on any money deposited in to it, as you can see from this example, you would not lose your invested savings. This “safe” kind of investing is generally low yield and builds up over a long period of time. There are many types of bank account that can provide these kinds of “risk free” investment opportunities. Some earn higher interest than others, the highest usually mean that you have very little access to your money over the investment term.
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Moderate investors, on the other hand, invest in a similar way, however, would risk some of their investment fund in higher risk activities. They may, for example, invest half of their fund in a higher risk investment.
If you employ aggressive investor tactics then you are taking high risks with your money. You will be investing in areas such as venture capital for new business startups, for example, the return on these high risk strategies can be immense, however, so can the losses.
You should do as much research as possible before investing any money, there is a wealth of information on the Internet. Talk to as many financial professionals as you can.