Whats your investing personality? If you were to listen to a conservative investor (a really really conservative investor) describing himself, heres what you might hear:

I am an ultra-conservative investor. I simply dont want to lose any money. Either I need to spend 100% of that money in the near future, or Im just not comfortable taking risks. I realize that I might earn little or nothing on my savings, and thats perfectly all right with me as long as I dont lose money.

As the old saying goes, Im more interested in the return of my money than the return on my money.

Investments for the Ultra-Conservative

Ultra-conservative investors might prefer to use bank accounts, certificates of deposit, short-term government-issued bonds, and (in some cases) fixed annuities. For a page full of ideas, see our list of safe investments .

These investments typically pay a low interest rate, but the investors money is not in the markets. The interest rate earned usually depends on interest rates in general: if interest rates are high, savings accounts pay more.

No Risk?

Ultra-conservative investors can generally avoid market risk (that is, they should not lose money when the markets go up and down), but they can’t avoid risk altogether. Being ultra-conservative with your money means that it probably wont grow much, and if it does its very unlikely to grow faster than the rate of inflation. That may be fine for some investors, but its important that they be aware that no approach is completely risk-free.

Why is inflation a problem? Prices tend to rise over time, and that means you lose purchasing power if the value of your assets doesnt rise along with prices (or if your income doesnt rise as prices do). $4.00 might buy you a gallon of milk today, but what about in 10 years? That gallon of milk will cost more possibly twice as much.

If you keep all of your money in ultra-conservative investments, you need to account for the possibility of rising prices. You’ll need to be able to absorb those higher costs, and that means youll need to sock away a lot more money because, with inflation, youre going to eat into a more and more of your savings as time goes on.

Ultra-conservative investments are great for short-term money. If you plan on spending some money in the next one to five years, a bank account is not a bad place for that money. However, over longer time periods, inflation will eat into your savings. This doesnt mean you cant be ultra-conservative or that its a dumb idea. All it means is that you need to know what can happen over time if you use safe investments, and plan accordingly.

So, if you have money stashed away that you dont intend to spend for 20 years or so, consider the possibility that you won’t be able to buy nearly as much with that money as you can buy today.

Other types of investment personalities include: