Question

Please write a paragraph or more explaining what types of people would be suited best for each of the following types of investment routes and why:

-Common Stock

-Mutual Funds

-Bonds

Answer 1

1.Common stocks- Common stocks are suited for people who have the desire to take high amount of risks and they can get exposed to firm related risks. These investors wants a high level of return and are well acquainted with valuation tools as they look to invest individually not with the help on an expert .They have a desire for taking higher risks and getting exposed to a possibility of making higher returns..

2.Mutual funds - Those who invest in mutual funds wants to take a moderate amount of risks and they want to get exposed to different types of makets through the help of a professional .These investors rely upon the skills of an expert and let them manage their funds in exchange of some charges. These investors are neither much risk takers nor much risk averse and they always like to keep their risk exposure to moderate by diversification by investing into mutual funds and as these funds are managed by experts , It can help them give a sense of security.

3.Bonds- Investors of bonds are passive investors who always look for minimal risks or risk free assets. These investors always want a uniform stream of cash flows and they never want to take risks .They could be categorized under highly risk averse investors. They cannot bear with the extreme beta of the stocks and they always look for complete elimination of credit risks so that they can get back whole of the principal repayments with the interest .