Accountancy Resources
An investor is a person or firm who purchases a security, bond, certificate of deposit, real estate, commodity, or other investment vehicle with the anticipation of making a positive financial gain over time.
Learning how to be an investor who makes sound and profitable investments typically involves developing experience in reducing a portfolio’s exposure to risk to a comfortable level while at the same time increasing its chances of achieving the most favorable return possible. In pursuit of this goal, many savvy investors will take the time to assess the risk to reward ratio of an investment in order to see how attractive the potential returns are given the risks involved.
Furthermore, learning how to be an investor involves understanding that investors differ from speculators since they are typically more conservative and hence tend to only be comfortable taking on lower levels of risk with their investment capital. They might even not wish to lose any of their investment capital at all, and so would only select investments that offer them considerable security for the safe return of their funds.
As a result of their conservatism, a typical investor’s anticipated return from an investment often tends to be lower than those that a speculator would consider worthwhile.
In addition, a speculator would often accept considerably greater risk levels than an investor. Such risks might even include the complete loss of their capital committed to a trading position in order to potentially earn profits that are substantially higher than average.
Both speculators and investors will typically perform general market research, as well as a more detailed review of the prospects and characteristics of the specific investment vehicle they are considering purchasing. They might do this by looking over recent news events related to the investment and by comparing its value and other statistics relative to similar investments within the same market sector. They might also perform various types of technical analysis that focus on market observables like price, volume, and open interest, rather than on fundamental data.
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