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Investors: What Do They Do and What Are the Types?

Are you a high net worth individual with over $5 million in liquid assets? If so, you are probably thinking of the best way to sustain your net worth. After all, accumulating a lot of money and maintaining that status quo are two different things. Research suggests that 70% of high net worth families tend to lose their wealth by the 2nd generation. 90% of these families will lose their liquid assets by the 3rd generation. Things like rising inflation, economic crises, lifestyle choices, and the time value of money all impact your net worth. Investing is one way to counter these challenges. If you want to join high net worth investors with over $10 million in liquid assets, we suggest you start by reading our guide on choosing a financial advisor.You will learn the basics of selecting an investment advisor who can help you venture into the world of investing.

You can also reach out to our team at Pillar Wealth Management. We are a fiduciary advisory firm with over 60 years of combined experience in money management. Our team of wealth managers can introduce you to investment concepts and help you create an investment portfolio that allows you to reach your goals. We work exclusively with high net worth individuals with $5 million to $500 million in liquid assets. Click here to arrange a free consultation.

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Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

In this blog, we will  reviewwhat do investors do, what are the three types of investors, and is an investor an owner? Let’s begin.

Table of Contents
What Do Investors Do?
What are the Different Types of Investment?
What are the Three Types of Investors Based on Risk-Levels?
How Does Age Influence Your Investment Decisions? 
Is an Investor an Owner?

What Do Investors Do?

An investor is any individual that invests money into an entity to generate a financial return. The entity can be a business, a property, or securities like bonds, gold, currency, etc. All investments pose a certain amount of risk. An investor’s aim is to reduce this risk while maximizing their return.

Experienced investors tend to stay away from risky assets that promise a higher profit. Instead, they stick to reliable options with historically sound returns. For instance, if you want to invest in a business by purchasing shares, you should stick to blue-chip stocks.

Blue-chip stocks belong to financially sound and well-established companies. These companies can remain profitable despite adverse economic conditions. Their stock prices remain stable, and they are capable of making regular dividend payments to their shareholders.
When it comes to securities like company stock, you can choose to be a trader or a long-term investor. Traders buy and sell securities to earn quick profits. On the other hand, long-term investorsbuy and hold stocks to earn returns on dividends. They can also sell these shares later to generate long-term capital gains. These investments offer tax benefits to high net worth investors since you are taxed at a lower rate.

To learn more about tax costs for long-term and short-term capital gains, click here to read our guide on finding the right financial advisor for managing $5 million to $500 million in liquid assets.


What are the Different Types of Investment?

Now that you knowwhat do investors do, let’s take a look at the different types of investment assets you can add to your investment portfolio.

1.    Bonds

Bonds are fixed-income securities that you can buy. In doing so, you lend money to the entity that has issued these bonds. This can be a corporate or a government entity. The money is used for financing projects and managing operations.

There are various types of bonds. Companies offer corporate bonds, and governments offer municipal bonds. You can also buy treasury bonds from the US treasury. Every bond has a maturity date. When it matures, you will receive the principal amount you spent on the bond plus the interest amount.

2.    Stocks

A stock is a piece of ownership in a publicly-traded company. You can earn a return by selling the stock when its price appreciates. As a shareholder, you can also receive periodic dividend payments for the number of shares you hold.

3.    Mutual Funds

Mutual funds are professionally-managed investment funds that pool money from numerous investors. This money is then invested into various securities such as stocks, bonds, exchange-traded funds, commodities such as gold, etc. Your investments get diversified across a variety of financial instruments, which lowers your risk.

4.    Certificate of Deposits

Like bonds, certificates of deposits are fixed-income securities. It is a savings account used to hold a fixed sum of money for a specified period. This can range from six months, five years or more. While the money is held in the account, the issuing bank will pay interest to the account holder.

When you redeem your certificate of deposit, you will receive the principal amount you invested along with the interest amount. Certificates of deposits are FDIC-insured.  They offer very low risk. However, you need to avoid any early withdrawals. These can lead to a penalty.

5.    Exchange-Traded Funds

Exchange-traded funds work similarly to a mutual fund. They comprise a collection of investments. However, they are purchased and sold on stock markets. The value of these ETFs fluctuates in much the same way as stocks. They are traded like ordinary stock multiple times a day

6.    Commodities

Commodities are physical assets that investors buy. They have an intrinsic value and can be traded with other goods of the same type or of the same value. Popular examples of commodities include precious metals like gold and silver. You can also invest in agricultural commodities like wheat and rice or energy commodities such as crude oil and petroleum.

The value of commodities is highly sensitive to changes in economic conditions. For instance, the COVID-19 health crisis hurt oil prices as demand fell. In April 2020, oil prices fell below zero. In comparison, gold prices increased to $2000 in August 2020, with investors buying it to safeguard their portfolio against stock market volatility and inflation. 

7.    Annuities

An annuity is an insurance contract. It promises to provide you with regular disbursements. These begin as soon as you enter into the contract or at a point in the future. In exchange, you are required to make a series of payments over a specified period. You can alsoprovide the company with a lump sum of money at the onset. Popular examples of annuities include pension plans, long-term care plans, etc.

There are various other types of investments as well. These include cryptocurrencies, foreign currency, options, etc. To learn more about how these investments work, we recommend arranging a free consultation with our financial advisorClick here to book an appointment.

You can also read our exclusive guide on the 5 critical shifts that impact investment portfolios to learn how different investment assets influence your returns.

What are the Three Types of Investors Based on Risk-Levels?

As a high net worth individual, you need to determine what type of investor you want to be. This will influence your returns, the kind of assets you add to your portfolio, and the amount of you risk you take on. Read on as we discuss what are the three types of investors based on their risk appetite:

1.    Risk-averse Investors

Also known as conservative investors, risk-averse investors opt for safe investments that offer low risk. They prefer to protect the principal value of their investment instead of seeking high returns. This type of investor can also opt for moderately conservative investing.

A moderately conservative investor will be willing to accept a small amount of risk to earn slightly high returns. However, they also seek to minimize their losses.

2.    Neutral/Moderate Investors

Moderately aggressive investors seek to reduce risks while also increasing their returns. They give equal emphasis to both aspects of investing. As a result, a moderate investor will be more open to accepting a reasonable amount of risk to earn high returns in the long-term. They may also be willing to bear short-term losses in exchange for long-term capital gains.

To learn about how you can balance your risk and return, click here to read our guide on how to improve portfolio performance for high net worth and ultra-high net worth individuals.

3.    Aggressive Investors

Aggressive investors prioritize high long-term and short-term capital gains and are open to taking on a significant amount of risk. Instead of protecting their principal investment amount, they aim for higher long-term gains. They are also willing to endure substantial losses by investing in highly volatile assets with the potential to generate higher-than-usual returns.

At Pillar Wealth Management, we primarily seek to maximize your returns while ensuring your portfolio remains within the defined risk threshold. To learn more about how we do this, we recommend ordering a free hardcover copy of our book The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million.

How Does Age Influence Your Investment Decisions? 

The type of investments you add to your investment style depends on a variety of things. One of the most important considerations here is your age. Young investors can typically take on more risk than those approaching retirement.

If you are in your 20s or 30s, you can add a higher proportion of high-risk investments such as stocks to your investment portfolio. This can allow you to sustain and grow your net worth at an exponential rate. Of course, you also need to take macroeconomic indicators like inflation and interest rates into account. These influence stock market performance. We also recommend allocating a portion of your portfolio to bonds and cash. Young investors find it easier to bounce back from heavy losses, but having these low-risk investments in your portfolio can ensure your portfolio remains stable.

For older investors who are approaching retirement, we recommend investment portfolios with a greater percentage of bonds and cash. These assets work differently than stocks, and you can safeguard your principal to a larger extent.

Remember, diversification is always important when it comes to investing. Investing can be highly unpredictable, and the more prepared you are, the better. To learn more about this, click here to read our guide on how to find a financial advisor for managing $10 million to $500 million in liquid assets.

You can also talk to our wealth managers. Click here to book a consultation.

Is an Investor an Owner?

Now that you know what do investors do and what are the three types of investors, let’s answer another important question – is an investor an owner? The answer depends on the type of investments you make.

For instance, if you invest in gold and buy gold bullions, you would own this commodity. On the other hand, if you buy stocks, you don’t necessarily own the company you have invested in. This also depends on whether you are a majority or a minority shareholder.

Minority shareholders own less than half of the total company shares. The majority shareholders hold over 51% of the total shares. Depending on the number of shares you own, you can also participate incritical business decisions and have a say in where the company is headed.

In the case of investments such as bonds, you are a lender. Lending investors do not own the corporate or government entity they invest in.


As a high net worth individual, it is essential you consider investing to grow the value of your liquid assets. In the long run, this can contribute to the financial security of your family and help you prepare against economic downturns that impact the value of your assets. By diversifying your liquid assets, you can navigate any potential pitfalls that cause you to lose your wealth.

If you need help with investment management, the team at Pillar Wealth Management can help. Our wealth managers have the necessary experience and expertise required to help investors maximize their net worth. We can discuss your investment goals and create a tailored wealth management plan for you. Our team is committed to making sure you meet your investment objectives and retire successfully.

Click here to book a free consultation and talk to one of our wealth managers today!

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