Here are investments for different types of personalities by risk.
Low Risk Tolerance
If you have a low risk tolerance you can expect a low return on investment. Here are some generally safer investments for those who don’t want to risk all of their money in the stock market.
Certificates of Deposits – Certificates of Deposits (CDs) are issued by banks and currently come with a very low interest rate. (Normally below 3% my local bank is offering .65%!) When you invest in a certificate of deposit you are essentially depositing a certain amount of money with a bank for a certain length of time. In exchange for you promising to keep your money in the bank they’ll let you earn more interest on your money than you would by letting it sit in checking. However, if you decide to withdraw your money early you’ll face penalties.
Treasury Bills – A treasury bill is a short term debt obligation backed by the US Government. Instead of earning interest on a treasury bill you buy the bill for a discounted price. For instance, you might buy a treasury bill for $980 and when the bill matures it’s worth $1,000.
Corporate or Government Bonds – Bonds are also debt loans in which the entity you bought a bond off will agree to pay you interest on the bond at the maturity date.
Medium Risk Tolerance
These investments definitely carry some risk but can bring you a higher return on investment than low risk options.
Mutual Funds/ETFs – Mutual Funds and ETFs are both a diversified basket of assets. Unlike buying one stock you get a nice mixture of stocks and bonds, usually mimicking a certain index. While these types of investments certainly aren’t risk free they are less risky than going all in on one stock.
Real Estate – Real Estate is a tried and true investment. What I love most about real estate is that when you invest in rentals or even flip properties you have a tangible asset.
High Risk Tolerance
High risk investments should not be taken lightly. With these types of investments there’s a chance for a larger return but there’s also a chance that you could completely lose all the money you put in!
Here are a couple of examples of high risk investments.
Forex Trading – Forex trading has become increasing popular over the past few years. When you trade forex you can sign up with a company like CMC Markets and then bet whether one currency will go up or down in value compared to another currency. You can also use leverage with this type of investment making it high risk.
Penny Stocks – My first investments were penny stocks. At the time I had no clue what I was doing so I found a few stocks that I “thought” would make it big. Luckily I had only invested a few hundred dollars in these because I have lost 80% of that initial investment over the past year.
What’s Right For You?
I definitely don’t believe there’s a one size fits all investment plan. What I do believe though, is that you should take the time to thoroughly learn about what you’re investing in. The more informed you are the better decisions you’ll make.