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Where are you with basic stock market concepts? That term can be very confusing, but here it will mean the methods in which you will invest. If you are working with online brokers or even in person brokers to invest, the first questions they will ask you will be about your knowledge of investments. Do not make the mistake of not being thorough and honest here. The goal is to understand not only that you want to make money, but how fast and how safe you want to make that money. In order to do that, you must define where you stand in basic stock market concepts for investment.
There are four main types of stock market investment methods, also referred to as risk tolerance: Aggressive Growth, Growth, Income and Capital Preservation. Every person is unique in what they need and desire. The combination of how soon you need to access the money and how much risk you are willing to take really defines where you stand in these basic stock market concepts.
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Aggressive Growth
For those who are planning to use the category of Aggressive Growth, get ready for a wild ride. Aggressive growth is just what it sounds like: rapid growth with a high level of investment risk. These are stocks that are often considered the more lucrative, but also the most risky. They are volatile securities. If you fit into this category, you are interested in trading in volatile securities that will tend to be riskier, but you are willing to take that risk in the hopes of a significant payout. The targeted rate of annual investment return for an aggressive investor is above the stock market average.
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Growth
A step down from aggressive, this category is a good option for those that want to gain significantly but want to preserve the amount of your initial investment as much as possible. Those that have a decent amount of time to leave their investment in the market are going to see better growth here, but there will be some difficulties throughout the course of that time. The rate of return expected as a growth investor is typically par with the stock market as a whole.
Income
If you want to see income from your stocks, rather, you wish to use the profits from your stocks as income, and then this basic stock market concept is right for you. Even more conservative than the growth category, you will see some risk but much less than aggressive growth.
Capital Preservations
You do not have a lot of time to wait for the market to straighten out in order to provide you with a return on your investment. You need to keep the amount of money you are investing safe to use when you need it. For example, if you are planning to retire in the next five years, you can use this category, which will give you some profit, at a much lower level, but preserves your investment better in the short term.
Choosing from these basic stock market concepts can be difficult for anyone just starting out. Therefore, use the help of your broker to determine where you stand. You may be able to find online tests to help give you a better idea of where you stand, too.
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