As you move up the ladder from low to high risk investments, your rate of return also rises, at least it should. This is where I have the bulk of my investment dollars because I consider the small risk (small if you have your money in the right places) well worth the gain.

The moderate risk investments include real estate, equity mutual funds, large/small cap stocks, and high-income bonds. Each of these investment categories has advantages and disadvantages. It will be up to you and your financial advisor, if you have one, to decide which of these is best for you.

My money is weighted in real estate. Part of the reason for that is that I’m comfortable there. It’s my happy place. There are drawbacks to real estate in that these assets aren’t readily converted to cash should you need it immediately. You also get to pay property taxes and mortgage payments which can draw down your profit considerably if you aren’t careful. In addition to that, they demand an ongoing outlay of capital, so you want to make sure you are capitalized sufficiently to cover these costs. Can you lose money with a real estate investment? Absolutely. However, the risks will be low if you learn how to invest wisely and don’t fall for the man get-rich-quick schemes that are out there.

I also have money in a variety of stocks. In other words, I own tiny pieces of a number of companies that my broker and I consider promising. Most of these have done well. I lost money when the market went sour, but all has rebounded because I didn’t panic and sell. Be advised that when you own stocks, you are placing your bets with companies that sell goods and services and absolutely everything affects their bottom line. Maybe a competitor comes out with a better widget or an importer can sell the widget cheaper. Oil prices rise so the cost of production and distribution rise with it and profits suffer a loss. Maybe the company hasn’t been astute in its environmental controls and the government mandates it reduce its pollution which creates an expense. Like I said, everything out there including what you and I buy, effects businesses and that can effect stock value and earnings for investors.

Bonds are a less risky than stocks in that you are loaning a company money with a guaranteed rate of interest. Also, if the company goes bankrupt, you are among the first to get paid out of the company’s assets.

Equity mutual funds are simply mutual funds that invest in the stock of a variety of companies. In other words, they have equity (ownership) in these companies. We will be going into detail on the pros and cons of mutual fund investments later in this series.

You can also buy stock in individual companies. As in the other investment types, there are both advantages and disadvantages in doing this. This is the way Warren Buffet made his millions. Think Coca Cola. Buffets investment philosophy will also be covered in this series.

I am giving you tiny bite sized pieces of information that you can digest easily. If I were to put together a tome, you probably wouldn’t have the time to plough through it, at least you wouldn’t if your schedule is anything like mine. I mention this here because you should read all of the series to get the big picture and thereby become a wise and knowledgeable investor.