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The Typical Investment Risk of Different Assets

UPDATED: March 2022

The Typical Investment Risk of Different Assets – Each investment carries a different risk, determined with a thorough and proper risk assessment. However, it would help most investors make better investment decisions if they knew about the risks that each asset carried with it. Therefore, we will share the typical investment risk of different assets to paint the right picture. Here is the typical investment risk of various assets.

Table of Contents

1. Cash Equivalents and Cash

You should consider cash equivalents and cash to be the safest and best way to keep your money. Bank CDs, savings accounts, and money market accounts come with FDIC insurance and offer modest interest rates. Cash equivalents that carry the least amount of risk are U.S. Treasury Bills and money market funds. So, if you were looking for safe investments, they don’t come much safer than these investments.

2. Fixed Income Assets and Bonds

Investing in bonds is considered to be less risky than investing in fixed-income assets. Corporate and government bonds are fixed-income assets. You should know that when investing in bonds, there are different risk levels for each bond type. It would be best to look at the ratings from agencies such as Standard & Poor’s and Moody’s to find bonds you can ideally invest in.

3. Mutual Funds and ETFs

If you’re searching for diverse investments, they don’t come much better than mutual funds and ETFs. When you invest in these funds, you can purchase different bonds, stocks, and other assets through a single investment. However, these funds’ assets are riskier, which is why you should do your homework to find funds that are less risky to invest in.

4. Individual Stocks

The most common investments around today are stocks, and each stock carries risk. When you purchase stock in a company, you get a share of the ownership, and the price of the stock will go up and down depending on the company’s performance. The stock’s market performance will also reflect in its value. Some investors consider purchasing individual stocks risky because they are volatile, and their value fluctuates wildly.

5. Penny Stocks

Penny stocks are riskier than other investment types because their value fluctuates wildly depending on market conditions. Most investors consider penny stock investments a gamble instead of an investment because you can never be sure whether you will earn a profit or loss from this investment.

Conclusion of: The Typical Investment Risk of Different Assets

We have discussed some of the major assets that carry different investment risks. If you want to benefit from your investments, you must understand the risks that each asset class carries within itself to make wise investment decisions that help your financial future.


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