Types of Investments

The basic concept of investing is really rather simple. The idea behind all types of investments is to use the money you already have to make more money down the road. That can mean a long way down the road, such as a twenty-something’s retirement, or a short distance down the road, such as a forty-something’s retirement plan.

Fittingly, an investment you plan to keep for the long haul is called a long-term investment. Conversely, an investment you plan to get into and out of rather quickly is called a short-term investment.

Okay, so that’s the difference between long-term and short-term investing. There are also two basic types of risks associated with the various types of investments: high-risk and low-risk. Some investors also insist that there is a third type deemed moderate-risk, which falls between the two extremes.

Low-risk investments are intended for those conservative investors who are not comfortable with the idea of possibly losing all their money. Low-risk investors are like the turtle as opposed to the hare. They prefer the slow and steady way to increased wealth.

High-risk investors, also called aggressive investors, are more like the hare. They are comfortable with the idea that they can get up and out there. They don’t hang back and wait for the tried-but-true methods.

Moderate investors, obviously, fall somewhere between the two extremes of conservative and aggressive investors. They tend to put some of their assets in low-risk ventures, some in high-risk, and some in moderately risky areas.

Low-risk investments are usually the ones that involve depositing cash into a financial institution in exchange for a small amount of accrued interest. Typically, this is the way most people begin their investment lives. The various accounts include the regular old savings account, certificates of deposit, money market accounts, and certificates of deposit. They are very safe, but the amount of interest you earn is lower than the possible return on higher-risk investments.

High-risk types of investments generally carry the opportunity to earn significantly more income; however, you also run the risk of possibly losing your money. The stock market is considered a high-risk type of investment, as is currency trading, futures trading, and some real estate investments. Investing in a brand new company can also be quite risky, but if the business is a huge success, the potential profit can be enormous.

Whether you choose to invest your money for a number of years or only for a few years, the idea of making your money “turn into” even more money is alluring. Whether you are comfortable watching your money grow just a touch at a time or want to see the thrill of a huge profit, there is a financial advisor who can guide you to the best types of investments for you. Generally, the faster you want to see a return, the more risk you will have to take, which is one really big reason it makes sense to start saving for retirement as soon as you get your first “real job.”