Make Money Investing Being Conservative Or Taking Risks

The stock market can be a scary place for an investor. There are so many things to keep track of that you could easily end up confused if you aren't careful. You could end up losing a lot of money if you go around investing aimlessly. If you want to make money investing then formulating your investment strategy is one of the first steps that you should take.

Your investment strategy shapes the overall direction of your investment portfolio. Your investment strategy depends on a number of factors such as your age, risk tolerance and investment horizon. If your strategy is to secure a guaranteed return so that you can sleep at night then your portfolio should contain a bunch of conservative low risk assets. These would include Treasury bills, Treasury bonds, savings bonds and certificates of deposits. All of these investments have a guaranteed return and are great for the investor seeking to play it safe.

Historically the greatest returns in the stock market are often made by investors willing to take the most risk. Men like George Soros, John Paulson, Jim Cramer, and Warren Buffett have made millions of dollars by being willing to take some sort of risk. You can make money investing in the stock market as well, if you are willing to take a risk.

While conservative investors play it safe, risk taking investors invest in much riskier assets. High risk investors are willing to take a potential loss for the opportunity to earn a greater return on their money. They do not take foolish risks with their cash but take calculated risk. A high risk investor's portfolio might consist of individual stocks, small cap mutual funds and high yield bonds. It could also consist of large cap stocks that are out of favor or buying a distressed asset. All of these investments are attractive to risk takers because they have the potential to grow significantly over time.

Make Money Investing Like A Pro

The Dow Jones Industrial Average recently crossed 12,000 and investors are feeling exuberant. Although the market has had an impressive run you can still make money investing. You just need to find undervalued stocks and undervalued sectors that have not had a huge run up yet. One of the ways to locate sectors that may be ripe for a move is by looking at last year's losers.

Last year's losers could quickly become next year's winners. The sectors that I would classify as undervalued are the financials, real estate, and consumer cyclicals. Stocks in these areas have not participated in the market advance of the last 2 years and have been largely ignored by Wall Street. Wall Street's ignorance could be your gain. You can start a position in stocks in these sectors and add to it over time. You may just find that you have found Wall Street's next winner by shopping in the discount bargain bin.