Conservative vs Risk Investing: Benefits and downsides

Investing is a common occurrence, investing wisely is a hopeful goal. Everybody wants their money level to increase, which adds to increased enjoyable opportunities that make our lives more pleasurable. Who can afford the possible opportunities? Perhaps, with a little bit of conservatism mixed with a bit of risk, each and everyone can.

We set aside a sum of money, which we receive from our sources of income, and then invest it. When we invest this money, it goes for a while before you can touch it. This is so we can get more later on when the money becomes available. This is where some risk is involved. What if we won’t get it back? What if we lose the money? There are different ways and options of investing money. Obviously, each option has its own level of risk. Which option is the best one? Is it better to keep money in home piggy banks or in the real FDIC banks? The answers to these questions may vary depending on several factors like what area you live in (involving economical and political issues), the income you have, and the goals you want.

We can divide investments, or better to say the style of investing, into 3 groups. These are conservative, moderate and speculator. Conservative investors should be patient people, because this kind of investment pays back over some period of time, as least a decade. What could be an option for them to invest in? The long-term bond is the first option. A treasury bond is the safest. However, if a good opportunity arises when the market sets a high price for the bond, a conservative investor might sell it. But it doesn’t mean this is a regular strategy. Other kinds of bonds may be also considered for a conservative investment portfolio. The bonds of reputable companies promise good returns, as do savings bonds. The only problem here is that the interest is not usually high on these, and it takes at least ten years to get the your money and profit out. Trading bonds wouldn’t be an option here because a conservative investor is a long-term investor. Trading bonds are used when risk is more involved within a shorter time span.

The second group of investors is known as the moderate investor. Being a moderate investor, means that you are somewhere in the middle, as you combine both patience and some risk. Usually, this investor doesn’t want to wait longer than 10 years, probably much less than this period to be able to get at their money out. What are the options for this kind of investor? Many people use corporate and municipal bonds. This investor can also be involved in trading bonds to some moderate extent. A moderate investor would diversify his portfolio with long-term and short-term bonds.

The third group of investors is the speculative investor. These people like to take risk. They buy junk bonds and trade them. These bonds offer high interest rates and high risk at the same time. Don’t be confused by the name JUNK bonds. These bonds are exactly like other bonds, with the only difference being the credit quality of their issuers. Junk bonds have two subgroups – fallen angels and rising stars. Fallen angels are characterized by their poor credit quality, when rising stars are on the way up the ladder of quality.

As you have learned, each option has its own features; it is up to you which one to follow. By researching and finding out as much as you can about the levels of risk for your investment, and the rewards you want to gain, you can be successful in the investment arena.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.