Test Run - Whilst the trader who sold you your brand new car or mp3 player will provide you with a 30 day money back warranty, there is no such thing as money back warranty in stock investment. Once the money's gone,its gone forever and that could be your life savings.

With access to the Internet, you can actually play the stock market with play money to get a feel for how it works. Do a search with any search engine for "Stock Market Games" or "Stock Market Simulations." This is a great way to start learning about investing in the stock market.

The Financial Planner - Finally, speak with a financial planner. Tell them your goals, and ask them for their suggestions, this is what they do. A good financial planner can easily help you determine where to invest your funds, and help you set up a plan to reach all of your financial goals. Many will even teach you about investing along the way, make sure you pay attention to what they are telling you.

Different Types of Investments - Overall, there are three different kinds of investments. These include stocks, bonds, and cash. Sounds simple, right? Well, unfortunately, it gets very complicated from there. Each type of investment has numerous types of investments that fall under it.

There is quite a bit to learn about each different investment type. The stock market can be a scary place for those who know little or nothing about investing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. There are also three types of investors: conservative, moderate, and aggressive. The different types of investments also cater to the two levels of risk tolerance: high risk and low risk.

1. Conservative Investors - Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, etc. These are very safe investments that grow over a long period of time. These are also low risk investments.

2. Moderate Investors - Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate.

3. Aggressive Investors - Aggressive investors commonly do most of their investing in the stock market, which is higher risk. They also tend to invest in business ventures as well as higher risk real estate. For instance, if an aggressive investor puts his or her money into an older apartment building, then invests more money renovating the property, they are running a risk. They expect to be able to rent the apartments out for more money than the apartments are currently worth or to sell the entire property for a profit on their initial investments. In some cases, this works out just fine, and in other cases, it doesn't. It's a risk.

Before you start investing, it is very important that you learn about the different types of investments, and what those investments can do for you. Understand the risks involved, and pay attention to past trends as well. History does indeed repeat itself, and investors know this first hand.

The Importance of Diversification - "Don't put all of your eggs in one basket." We have all probably heard of this advice and when it comes to investing, it is very true. Diversification is the key to successful investing. All successful investors build portfolios that are widely diversified, and you should look at this option too.

Diversifying your investments might include purchasing various stocks in many different industries. It may include purchasing bonds, investing in money market accounts, or even in some real property. The key is to invest in several different areas, not just one.

Diversification May Bring Better Returns - Over time, research has shown that investors who have diversified portfolios usually see more consistent and stable returns on their investments than those who just invest in one thing. By investing in several different markets, you will actually be at less risk also.

For instance, if you have invested all of your money in one stock, and that stock takes a significant plunge, you will most likely find that you have lost all of your money. On the other hand, if you have invested in ten different stocks, and nine are doing well while one plunges, you are still in reasonably good shape.

Diversification Plans - A good diversification will usually include stocks, bonds, real property, and cash. It may take time to diversify your portfolio. Depending on how much you have to initially invest, you may have to start with one type of investment, and invest in other areas as time goes by.

Lower Your Risk - If you can divide your initial investment funds among various types of investments, you will find that you have a lower risk of losing your money, and over time, you will see better returns. Experts also suggest that you spread your investment money evenly among your investments. In other words, if you start with £100,000 to invest, consider investing £25,000 in stocks, £25,000 in property, £25,000 in bonds, and £25,000 in an interest bearing savings account. ie ensure a good spread is achieved.

Honest Johnny - The Consumers' Advocate.

Article Author: P. Hata