Which of the three investment options is the least risky?
At the low-risk end of the spectrum are basic investments such as Certificates of Deposit (CDs); bonds or fixed-income instruments are higher up on the risk scale, while stocks or equities are regarded as riskier. Commodities and derivatives are generally considered to be among the riskiest investments.
The Bottom Line
Safe assets such as U.S. Treasury securities, high-yield savings accounts, money market funds, and certain types of bonds and annuities offer a lower risk investment option for those prioritizing capital preservation and steady, albeit generally lower, returns.
While the product names and descriptions can often change, examples of high-risk investments include: Cryptoassets (also known as cryptos) Mini-bonds (sometimes called high interest return bonds) Land banking.
- Savings Accounts. Certain financial products provide more liquidity than others. ...
- Certificates of Deposit (CDs) ...
- Money Market Accounts. ...
- Bonds.
Equities and equity-based investments such as mutual funds, index funds and exchange-traded funds (ETFs) are risky, with prices that fluctuate on the open market each day.
| Risk & return | Types of investment |
|---|---|
| Low-risk & low-return | money markets, treasury bills, bonds |
| Moderate-risk & moderate-return | mutual funds, index funds |
| High-risk & high-return | stocks, cryptocurrency, commodities |
Examples of potential low-risk investments include money market accounts, certificates of deposit and Treasury bills. But keep in mind that low-risk investments do not guarantee returns, and they may even lose value because of inflation or other risk factors.
What Are Some Types of Investments? There are many types of investments to choose from. Perhaps the most common are stocks, bonds, real estate, and ETFs/mutual funds. Other types of investments to consider are real estate, CDs, annuities, cryptocurrencies, commodities, collectibles, and precious metals.
Mutual funds are the riskiest type of investment. The difference between a chosen investment and one that is passed up is _____.
Possibly the greatest of these risks is that a portfolio with too much cash won't earn enough over the long term to stay ahead of inflation and that it won't provide enough protection against inevitable downturns in stock markets.
Which of the following type of investment is the least risky quizlet?
The money market account is the least risky investment, because it invests in United States government bonds, and the United States government is very unlikely to default.
Fixed deposits with banks are still considered one of the safest options for investing. Here, you get to accumulate money at a much higher interest rate compared to regular savings accounts. Here, the fund remains secured and offers a guaranteed return upon maturity.
- Treasury Inflation-Protected Securities (TIPS) ...
- Fixed Annuities. ...
- High-Yield Savings Accounts. ...
- Certificates of Deposit (CDs) Risk level: Very low. ...
- Money Market Mutual Funds. Risk level: Low. ...
- Investment-Grade Corporate Bonds. Risk level: Moderate. ...
- Preferred Stocks. Risk Level: Moderate. ...
- Dividend Aristocrats. Risk level: Moderate.
Government bonds are considered one of the safest types of investments because they are backed by the government.
Investments with lower exposure to reinvestment risk include longer-term bonds, zero-coupon bonds, and non-callable bonds.
Cash investments generally offer a low return compared to other investments. They may also have very low levels of risk, in addition to being insured by the Federal Deposit Insurance Corporation (FDIC).
A risk-free asset is one that has a certain future return—and virtually no possibility of loss. Debt obligations issued by the U.S. Department of the Treasury (bonds, notes, and especially Treasury bills) are considered to be risk-free because the "full faith and credit" of the U.S. government backs them.
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Bonds.
- Money market funds.
- Mutual funds.
- Index Funds.
- Exchange-traded funds.
- Stocks.
Money Market Mutual Funds
Money market mutual funds invest in various fixed-income securities with short maturities and very low credit risks.
A three-fund portfolio is a portfolio which uses only basic asset classes — usually a domestic stock "total market" index fund, an international stock "total market" index fund and a bond "total market" index fund.
What are the three 3 categories of investment?
As an investor, you have a lot of options for where to put your money. It's important to weigh types of investments carefully. Investments are generally bucketed into three major categories: stocks, bonds and cash equivalents.
To build a three-fund portfolio, invest in a total stock market index fund, a total international stock index fund, and a total bond market fund. These can be either mutual funds or ETFs (exchange-traded funds).
Non-investment grade bonds, or "junk bonds," are considered higher risk and earn higher returns than investment-grade bonds or U.S. government bonds. However, you also run a higher risk of default, or not getting your money back. You can invest in corporate bonds through a broker.
The very top of the investment pyramid represents the riskiest investments; options, futures, and speculative stocks and bonds are found here. While the payoff can be big, so can the loss. For example, certain futures contracts can put you at risk of infinite losses.
The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices.
