An investor is someone who puts their money into an idea, project, or company in the hopes of making a profit. In addition to stocks, bonds, mutual funds, or real estate, investors can also park their money in precious metals, wine, coins, rare books, and other valuable objects to make money.
The approach an investor follows will depend on many things, including their age, income, investing timeline, and even temperament.
For example, risk adverse investors tend to be cautious about what they invest in. Risk adverse investors are attracted to so-called safer investments, like blue-chip stocks, stocks listed on the Dow Jones Industrial Average, index funds, and government bonds.
On the other hand, investors who are speculators have a higher tolerance for risk and favor a quick profit. Investors who are speculators buy shares in a company based on a wide variety of factors, such as economic indicators, where it’s trending in the news, or if it is experiencing higher than normal volume.
Buy-and-hold investors are those with an eye on the horizon. Instead of buying into a short-term play, a buy-and-hold investor considers the long-term. Short-term volatility does not really matter for buy-and-hold investors since they have a long-term investing outlook.
Finally, income investors are those who want to receive regular income from their investments. This can come in the form of dividend-yielding stocks or bonds. When the stock market is doing well, dividends provide a recurring revenue stream and capital appreciation for these investors. A dividend-yielding stock can also provide investors with regular income when the markets are doing poorly.