Types Of Stock Investment – Based On Risks


The online stock trading markets are an open trading arena for all to play in. With a large number of people investing their earnings into the stock market, there is little scope for the market to remain stable. From the minute it opens in the morning to the minute it closes in the evening, there is hardly a second when buying or selling is not taking place; thus the reason why the markets are called unstable. The biggest problem with the markets is that there are times when the market would boom sky high whereas there would also be times when it would fall like dominos.

Despite all these factors, it is still one of the best methods to make money. This of course requires the investor to know his math and keep close watch on what is going on. For someone who is serious, this would not be a tough task. All he requires is an understanding of the market and how it operates. All in all, there are 3 types of investment that one may indulge in, namely:

a) High Risk

b) Moderate Risk

c) Low Risk

Let us examine them individually.

a) High Risk Investment: As the name suggests, high risk investments are full of risks. While they promise high returns, they may also cause huge losses. There is little to predict because of the volatile nature and requires the investor to be on his feet at all times and there is virtually no way to categorize a particular stock into high return or low return brackets. However, before investing, you should know that in order to prosper, it is important to keep a cool head and not panic.

b) Moderate Risk Investment: This form of investment acts as balancer between high risk and low risk investment. While there is lower volatility compared to high risk, it is definitely higher than low risk. On the other hand, the returns on investment are higher compared to low risk but lower compared to high risk. In short, this type of investment is for those who want good profits but at the same time are not ready to take high risks.

c) Low Risk Investment: These are investments which are very stable and carry minimal risks. As a result, they are more predictable which allows the investor to breathe easy at all times. However, the returns on investment are not high but very low compared to the others.

For someone who can afford to spend a major part of the day looking at the figures, the best place to invest would be high risk wherein even if something goes wrong, immediate rectification measures can be taken. On the other hand, for those who are just looking for a place to invest, low risk investment is the place to be. Make sure to do some research before placing the money in the market. It is nothing but small factors that decide whether the investor makes profits or suffers from losses. To be a part of the former, one has to be smart and accurate.