Which Of The Following Correctly Orders The Investments From Lower Risk To Higher Risk?
Which of the following correctly orders the investments from lower risk to higher risk? Stocks, bonds, and mutual funds are the most common investment products. These assets are related to higher risks yet high returns on investment.
Bonds and stocks are considered to be good investments because they’re shock absorbers that can stop you from tapping the panic button.
Stocks are purchased and sold predominantly on stock exchanges. Moreover, stockholders do not own corporations, they own shares and you need to understand this at the beginning. Stocks are of two kinds: Common and Preferred. Let’s know more about the same in detail.
Which Of The Following Correctly Orders The Investments From Lower Risk To Higher Risk?
The answer to your question Which of the following correctly orders the investments from lower risk to higher risk? Is Stock – Diversified Mutual Fund – Treasury Bond.
Treasury bonds pay a fixed rate of interest every 6 months until they mature. These are issued for a period of twenty years or thirty years and you can purchase these binds from the US. At the same time, you can buy them via a broker or a bank.
A diversified fund is an investment fund that is widely invested across several market sectors, geographic regions, and assets. Moreover, this is actually an investment tactic for decreasing systematic risk in a portfolio.
All the young investors move towards higher returns because they are willing to gain profit in a short period of time. However, lower risks assets do not consist of high returns on investment. One of the highest returns on investment are Bitcoins and other Cryptocurrencies.
Bonds & Stocks – All You Need To Know
Bonds are a kind of loan from you to the government or a company. There are no shares or any kind of equity involved. Whereas, Stocks represent partial ownership, or equity, in an organization.
US treasury bonds are generally more stable than stocks. However, these give lower returns as compared to stocks because it is related to lower risks. At the same time, the largest risk of the stock market is the share value mitigating after you have bought them.
The most common types of bonds include corporate bonds, municipal bonds, agency, savings, and treasury. Each bond consists of its own return, risks, and purposes.
The biggest difference between stocks and bonds is how they generate profit. Bonds pay fixed interest over time while stocks must appreciate in value and be sold later on the stock market.
The Final Thoughts
“Which of the following correctly orders the investments from lower risk to higher risk?” Investments involve risks and this is common. However, some investments consist of lower risks and vice versa. Keep in mind, the investment that involves high returns is related to higher risks.
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