Are you wondering how many types of investors are there? Every day, there are people who fear losing money in an investment, while others never fear it. In any industry, investing has its own language. Many people are skeptical about where they invest their money because they don’t know how to build an ideal investment portfolio.
Think of an investment portfolio as a safe to store your valuables. For example, real estate, stocks, bonds, mutual funds and so on. But an investment portfolio is more of a concept NOT a physical item.
If you know how to invest and build your investment portfolio, you won’t fear changes in the stock market. You’re wise enough to know that you don’t need to make more money to be able to save it because saving isn’t the answer.
Saving your money may help with future debts but it isn’t going to get you to financial freedom. What you need to do to build your wealth is to invest it, and the amount you invest has nothing to do with your income level.
Instead, what you invest is an indication of your financial confidence: your knowledge and skills when making decisions about money.
With that said, understanding what an investment portfolio is, doesn’t tell you how to build one. First, you need to know the types of investors. And then you have to learn how to invest. Only then, you’ll be able to build your ideal portfolio.
Take Time to Learn the Types of Investors
It’s important for entrepreneurs to take the time to learn the types of investors. Why? Because they are unique players in the growth process of a business. To determine a company’s success or failure is ultimately determined by the level and quality of an investor’s involvement.
There are plenty of stories about people using their own savings to invest in a company. Many still deeply rely on investors. If you depend solely on your savings, you’re not likely to grow as big as you want it to be. Having an investor can play a big role in your success.
5 Types of Investors
Banks
A bank loan works the same as any other business investment. The entrepreneur is required to present a business plan, and then the bank will decide whether it should provide the funds. Also, you may need to provide some proof of collateral or a revenue stream before your loan is approved.
Angel Investors
An angel investor is a high-net-worth individual who provides financial aid to help the business get off the ground often found among entrepreneurs’ friends and family. Typically, angel investors provide financial aid in exchange for ownership equity in the company usually a one-time investment to assist and support a company through its difficult early stage.
Now, this type of investment is risky, because it doesn’t represent more than 10% in your investor’s portfolio. They focused on helping startups as opposed to venture capitalists.
Venture Capitalists
So, what is a venture capitalist (VC)? A venture capitalist is an equity investor. They focus more on companies that exhibit higher growth potential in exchange for an equity stake. VC investors could be funding a startup that wishes to expand but doesn’t have access to equity markets. And usually, they do not.
The difference between angel investors and venture capitalists is that, they are willing to take higher risks because they know they can earn a higher return on investments (ROI) if those companies gain success.
Corporate Investors
As a corporate investor, investing in startups carries a variety of benefits including supporting their own growth and diversifying assets. While some invest outside of startups, more are leaning towards starting their own accelerators and incubator programs.
These types of investors can be great collaborators. However, a careful approach with a lot of patience must be taken into consideration in order to have an enjoyable relationship between founding partners and corporate investors. It’s vital to understand each other and have some boundaries in agreement.
Personal Investors
This may sound the easiest of all types of investors. But think twice before heading in this direction. It is always a risk when mixing business with family. Not only do you risk your finances, but also your family and friends if the business goes downhill.
When choosing this option, make sure your family ties are strong enough to withstand the pressure. You can either have each party sign a promissory note on repayment terms or sign a partnership agreement.
Building an Investment Portfolio
Markets go up and down. Investing isn’t a game and certainly, it’s not something that you could acquire in the shortest period of time. You can’t achieve perfect performance through market timing. However, you can build up your ideal portfolio. A solid portfolio certainly will allow you to succeed and avoid the stress of market volatility.
Here are some of the areas where you can invest your money;
Stocks
Bonds
Mutual funds
Real estate investment trust
Alternative investments
Private companies
So, if you understand how money works, that’ll help you build your ideal portfolio. And diversification is the key to success when investing.
