Discovering The Different Types Of Investors And Stocks

Published: 31st December 2008
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Overall, there are three different kinds of investments. These include stocks, bonds, and cash. There is quite a bit to discover about each different investment.

The stock market can be very scary for those that know little or nothing about investing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. The types of investors are either conservative, moderate, or aggressive. The different types of investments also cater to the two different levels of risk tolerance which are high risk and low risk.

Different Investor Types

* Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments.

* Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate.

* Aggressive investors commonly do most of their investing in the stock market, which is a higher risk. They also tend to invest in business ventures as well as higher risk real estate. For instance, if an aggressive investor puts his or her money into an older apartment building, then invests more money renovating the property, they are running a risk. They expect to be able to rent the apartments out for more money than the apartments are currently worth - or to sell the entire property for a profit on their initial investments. In some cases, this works out just fine, and in other cases, it doesn't which is why it is a high risk.

Different Stock Types

The different types of stock are what confuse most first time investors. That confusion causes many people to turn away from the stock market altogether, or to make unwise investments with their money. If you are going to get involved in the stock market, you must know what types of stocks are available and what it all means!

Common Stock is a term that you will hear quite often. Anyone can purchase common stock, regardless of age, income, age, or financial standing. Common stock is essentially part ownership in the business you are investing your capital in. As the company grows and earns money, the value of your stock rises. On the other hand, if the company does poorly or goes bankrupt, the value of your stock falls. Common stock holders do not participate in the day to day operations of a business, but they do have the power to elect the board of directors.

Along with common stock, there are also different classes of stock. The different classes of stock in one company are often called Class A and Class B. The first class, class A, essentially gives the stock owner more votes per share of stock than the owners of class B stock. The ability to create different classes of stock in a corporation has existed since 1987. Many investors avoid stock that has more than one class, and stocks that have more than one class are not called common stock.

The most upscale type of stock is of course the Preferred Stock. Preferred stock isn't exactly a stock. It is a mix of a stock and a bond. The owner's of preferred stock can lay claim to the assets of the company if there is a case of bankruptcy. Preferred stock holders get the proceeds of the profits from a companies bankruptcy before the common stock owners. If you are looking into the preferred stock area, be aware that the company typically has the right to buy the stock back from the stock owner and stop paying dividends.

Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and investors know this first hand!

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