The bulls and the bears, though the most recognized and respected, aren’t the only animals running around the financial districts of the world. There are also confused pigs, sheep, ostriches and chickens masquerading about in suits, trying to emulate the bears and bulls.

Some investors are referred to as “pigs,” and they essentially let their greed overrun their intelligence. Pig investors look to make a quick fortune on hot stocks they hear will go up; this can work at times, turning a neat profit. The problem with pig investors is that they latch onto the stock even after it increases in value significantly, hoping to squeeze even more of a profit out of it. Eventually, though, even the hottest stocks burnout, and the pigs get burnt with a loss.

Knowing when to sell is just as important as knowing when to buy, because a stock can only yield so much profit.

“Sheep” investors follow the herd, lack self-discipline and act on their whims. They let a number of factors cloud their market judgement. They might listen to advice from others or act on emotions, ignoring personal strategies.

Good investors know the importance of staying focused and sticking to a plan, because otherwise the markets will take them on a very expensive rollercoaster ride, leaving them traumatized.

Ostriches are known to hide their head in the sand when threatened, and figuratively so do “ostrich” investors. Ostrich investors crack under pressure and often ignore the stock market when it is not performing in their favour. They may also ignore pieces of information that are not beneficial to them.

Successful investors know that it is vital to stay informed about the stock market and take into account all available information in an objective manner. The stock market is anything but stagnant, and an investor who ignores it puts him or herself in a dangerous financial situation.

Some investors are deemed “chickens”; they are afraid to take risks and are always playing it safe with their money and trades. This results in unremarkable and sometimes insignificant profits because calculated risks are a vital part of successful investing.

As a result of the changing nature of the stock market, it is impossible to make risk-free investments. Calculated risks or accepted risks are necessary risks an investor takes based on research. Calculated risks help investors determine if the investment they are about to pursue is worth it and feasible, because if risk becomes reality they need to be able to overcome it.

An investor who performs his or her market research will have a strong portfolio and is said to have done his or her due diligence. A portfolio is an investor’s personal collection of owned securities.

Securities are the intangible assets of the investment world and include bonds, derivatives, and of course stocks.

Bonds are contractually loans between institutions and individuals who choose to purchase bonds. The incentive behind purchasing a bond is that the institution must pay the individual interest on top of repaying the loan. Bonds became popular during the First and Second World Wars when governments used them to raise funds for the war efforts.

Interest is essentially the price of borrowing money. Interest is usually calculated as a percentage of the total money borrowed.

Derivatives, like bonds, are contractual obligations between two parties, but they are not loans. In its simplest sense, derivatives are bets that provide insurance, utilized to protect the derivative holder from incontrollable factors.

An investor who buys stock in a foreign market, for example, has to deal with changing exchange rates. To protect against changing exchange rates, an investor could enter into a derivative agreement with the seller of the stock. Even if the exchange rate changes, the derivative would cancel out this change by forcing the seller to pay the investor the difference.

There are many different types of derivatives that address everything from the interest on bonds to external factors like weather patterns, which might affect the performance of the stock of a travel company. Derivatives usually have an expiration date.

Derivatives, bonds and stocks are the main items perpetually traded back and forth in the investment world, but each item has various sub-categories and conditions, which build upon the basis of their essence.

It is important to become familiar with the trio; they are more than items that are traded, and they are also powerful instruments that have the potential to forge fortunes.