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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, 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 i
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.
As always all
the best for your investing.
Invest with
knowledge
MR (ed)
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