10 Investments Ranked From Least Risky to Most Risky

Have you ever considered how risky the investments in your portfolio are?  While this is not an exact science, we will list here several investments from the least risky to the most risky in terms of the general stock market.

What would you say should be the majority of a portfolio for an investor with short term needs?  What about an investor with a very long term investment horizon?

Here are the investments:

1. Cash, Certificate of Deposits, Money Market Accounts, Money Market Funds
2. Treasury Bills, Treasury Notes, Treasury Bonds
3. State Bonds, Municipal Bonds
4. Corportate Bonds
5. S & P 500 Passive Index Funds
6. Large Cap Fund
7. Small Cap Fund, Mid Cap Fund
8. Individual Stock, International Funds
9. Sector Funds, Real Estate Funds, Commodities
10. Stock Options, Futures Contracts

In general, cash accounts and accounts used to lend money between banks have little risk.  US government backed treasury investments also have a great track record and thus have little risk.  Moving into State and Municipal Bonds, there is little risk because cities and districts rarely go bankrupt (although both Stockton and Vallejo recently went bankrupt in California).  Corporate bonds are less risky that stock since debts must be paid before shareholders.  General funds for larger companies are the first of the higher risk investments, but still a little conservative.  Then individual funds, sector funds and various derivatives tend to be the most risky investments.

Do you agree with this general assessment of risk?  Read more about other types of risk at stocks.about.com.

Thanks for reading! Upcoming posts will discuss more about what a company is required to pay as well as derivatives.

This post was reposted from http://finlit.biz/retirement-2/10-investments-ranked-from-least-risky-to-most-risky/, originally written on February 5th, 2013.