Because investing is not a sure thing in most cases, it is much like a game – you don’t know the outcome until the game has been played and a winner has been declared.
Anytime you play almost any sort of game, you have a scheme. Investing isn’t any different – you require an investment scheme.
Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only 3 specific investment trends – and those 3 trends tie in with your risk tolerance.
The 3 investment trends are conservative, moderate, and aggressive.
Things To Understand
An investment scheme is basically a plan for investing your cash in various sorts of investments that will help you meet your financial goals in a particular amount of time. Each sort of investment contains individual investments that you must select from. A clothing store sells clothes – but those clothes consist of shirts, pants, dresses, skirts, undergarments, etc. The stock exchange is a type of investment, but it contains assorted sorts of stocks, which all contain different companies that you are able to invest in.
If you haven’t done your research, it may quickly become very confusing – merely because there are so many assorted sorts of investments and individual investments to select from. This is where your scheme, combined with your risk tolerance and investment trend all come into play.
If you’re new to investments, work closely with a financial planner before making any investments. They’ll help you develop an investment scheme that won’t only fall inside the bounds of your risk tolerance and your investment trend but will also help you accomplish your financial goals.
Never invest cash without having a goal and a scheme for reaching that goal! This is essential. Nobody hands their cash over to anyone without knowing what that money is being used for and when they’ll get it back! If you don’t have a goal, a plan, or a scheme, that’s essentially what you’re doing! Always start with a goal and a scheme for reaching that goal!
Naturally, if you find that you have a low tolerance for risk, your investment trend will most likely be conservative or moderate at best. If you have a high tolerance for risk, you’ll most likely be a moderate or aggressive investor. At the same time, your financial goals will likewise determine what trend of investing you utilize.
If you’re saving for retirement in your early twenties, you should utilize a conservative or moderate trend of investing – but if you’re attempting to get together the funds to buy a home in the next year or two, you’d wish to utilize an aggressive trend.
Conservative investors wish to maintain their initial investment. Put differently, if they invest $5000 they wish to be sure that they’ll get their initial $5000 back. This type of investor commonly invests in common stocks and bonds and short-term money market accounts.
An interest-earning savings account is really common for conservative investors.
A moderate investor commonly invests much like a conservative investor but will utilize a portion of their investment funds for higher risk investments. A lot of moderate investors invest 50% of their investment funds in safe or conservative investments and invest the remainder in riskier investments.
An aggressive investor is willing to take risks that other investors won’t take. They invest higher sums of money in riskier ventures in the hopes of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the securities market.
Again, determining what trend of investing you’ll utilize will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should cautiously research that investment. Never invest without having all of the facts