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.
When it comes to investment. Most people may think of their homes or cars, for example. Rather, i’m talking about different types of investors. Which i’ll be sharing with you shortly.
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 income level.
Rich people focus on investing. Poor people focus on saving. Click To Tweet
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.
Watch this video about how to get started.
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. As i said earlier, your growth process is determined by the level and quality of an investor’s involvement.
Now, let’s get into the 7 types of investors.
1. 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 they should provide the funds. Also, you may need to provide some proof of collateral or a revenue stream before your loan is approved.
According to Investopedia, if you want to fund the expansion of your small business. Consider a Small Business Administration (SBA) loan. However, if you have access to other financings with reasonable terms, then you are not eligible for this loan. This is a good loan to apply if you did not qualify for a traditional bank business loan.
2. Angel Investors
An angel investor is a high-net-worth individual who provides financial aid to help the business get off the ground. They are often found among entrepreneurs’ friends and family. Typically, angel investors provide financial aid in exchange for ownership equity in the company. And this is 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. But since they focused on helping startups. Therefore, they are the opposite of venture capitalists.
3. 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.
So, whether you’re seeking an investor or looking to be an investor. Understanding the types of investors is important in today’s world.
Here’s the top 5 value of venture capital investment in the 3rd quarter of 2019. (by industry)
4. Peer-To-Peer Lenders
Embracing technology in today’s digital landscape is a must. Peer-to-peer (P2P) lenders consider businesses and projects that are listed online. There are 2 websites that specialize in peer-to-peer lending. There are,
This type of investor acts similarly to the Small Business Administration (SBA) Loan. Now, when it comes to peer-to-peer lenders, your credit history plays a part when engaging a P2P lender. So, check and improve your credit history before finding a P2P lender. Because, if you have a low credit score, they may not find you loan-worthy.
On another note, make sure you understand the terms and conditions on your loan and make payments on time. Failure to do so will result in increased fees and most likely won’t get you another peer-to-peer loan.
5. 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.
6. Corporate Investors
As a corporate investor, investing in startups carries a variety of benefits. This includes supporting their own growth and diversifying assets. While some invest outside of startups, more are leaning towards starting their own accelerators and incubators 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 agreement.
7. Accelerators and Incubators
Accelerators and incubators are perhaps the ultimate gateways to a variety from the types of investors on this list. Why? Because, if you’re accepted into one of their programs. You may receive from $10,000 to $120,000 dollars to develop your idea for growth. The best part about this is, you’ll be able to benefit additional knowledge and resources.
However, there are certain things to consider when joining the program. So, if you’re looking to take your business to the next level. Be ready to hustle.
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 within market volatility.
If you know how to invest, you know how to build your investment portfolio. Click To Tweet
Your investment portfolio is like an umbrella for all of your accounts and they consist of some of these,
- A 401(k) or employer-sponsored plan.
- Cash in savings accounts or invested in certificates of deposit
- Individual retirement account
As i said in the beginning, your home and cars aren’t considered part of an investment portfolio. Rather, i’m talking about how you can use your money to make money. Such as,
- 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. Also, when you understand the different types of investors. you’ll have clarity on investing principles. Here are 5 essential guides to building your ideal portfolio.
Have a Purpose and Stay Committed
Ask yourself this question before you invest. Why do you want to invest? Maybe it’s for your family or it could be generating an additional stream of income so that you can achieve financial confidence. Or maybe you want to buy a second home. Most likely, your answer could be all of the above. So, if you are aware of your purpose and you already know what you want to accomplish. What would it take you to get there? And out of these 7 types of investors, which would best fit you?
Solid Understanding of The Fundamentals
To build your ideal portfolio is not just investing blindly. Understanding the fundamentals of individual securities is crucial to building a solid portfolio. And that’s what they are assembled based on.
Your ideal portfolio should be diversified across sectors that are expected to perform well. Plan and have a good strategy to execute your purpose. Think quality over quantity. Click To Tweet
Give Yourself Some Time to Build
This is critical because building your portfolio by identifying your purpose requires you to link all of your ideas. So, when you understand the types of investor that suits you best, you need to give yourself some time. Such as, what you need to achieve? So, based on your solid fundamentals, and a proven approach. It keeps you away from in-and-out, market-timing types of investing approach.
Focus on Things You Can Control
There are certain things you wish you could control. Such as, the market, companies that you’ve invested in and the political views. The truth is, you can’t. However, with your individual approach and mindset, focus on the things you can control. Determine a powerful strategy and stick with it.
Be Realistic With Your Goals
While most of us know how much we have saved. Very few have a realistic understanding of our goals. You might have an inkling of what you spend today and how much you need for the next stage of life. Maybe, you have a 5-year plan. But, how much risk are you willing to take on to achieve your goals? And does your 5-year plan look realistic with the steps you’re implementing?
What You Invest is an Indication of Your Financial Confidence
Your knowledge and skills when making decisions about money is critical. The way we save and make money can be grouped into seven types. I learned about these seven levels of investors from Robert Kiyosaki, and over the years, i’ve put my own spin on it.
While it’s common for one investor to drift a little from one type to another, most people stay fixed at one type for their entire lives.
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