Good Morning Green Panda Friends. The decision to start saving money and start investing money is a smart one; how we decide to invest our money is almost as important as the decision to start saving money. There are several great resources that can help us decide how we want to invest our money such as our bank or financial institution, the various personal finance blogs around the web, as well as personal finance books and magazine.
There are various factors that we have to consider when we are deciding how we should invest our money such as how much we can afford to save on a monthly basis, how long we want to invest, which financial goal we are saving for, as well as how much risk we are willing to take on our investments. The level of risk that we are willing to accept on our investments in order to earn a certain rate of return on our investments is one of the factors that decide which type of investor we are.
How much risk are you willing to take?
Cash Hoarder. If you like to save money but not necessarily invest it then you may be a cash hoarder. This type of investor usually puts their money in short term liquid investments that are easy to access such as Money Market Mutual Funds or Treasury Bills. An alternative investment can also be a High Interest Savings Account.
Conservative and Steady. This type of conservative investor enjoys a steady rate of return and they are not looking for a high rate of return. Fixed Income investments such as Bonds, Bond Mutual Funds, and Mortgage Backed Securities are best suited for conservative investors who are willing to take a small amount of risk in order to earn a potentially higher rate of return on their investments.
Balanced. A balanced investor has a longer time horizon for their investments which is usually five year or longer. A balanced investor is looking for both security and growth on their investments. A mixture of domestic equities and fixed income make the perfect investment portfolio for a balanced investor.
Risk Oriented. Investors who are looking for growth over the long term are very comfortable with taking risk on their investments. Risk versus return on our investments is an important factor when choosing which investments we want to purchase. Risk oriented investors are willing to accept short term fluctuations on their investments in order to gain a higher rate of return over the long term. A portfolio of majority all domestic equity diversified among several sectors is an investment portfolio best suited for risk oriented growth investors.
No Holds Barred. An aggressive growth investor wants to invest in both domestic and foreign equity in their investment portfolio. This type of investor is very comfortable with fluctuations in the value of their investments and they are very comfortable with taking a large amount of risk in order to earn a potentially higher rate of return.
Which type of investor are you?
Photo by JonOlave