The investment* landscape can be extremely dynamic and ever-evolving. But those who take the time to understand the basic principles and the different asset classes stand to gain significantly over the long haul. The first step is learning to distinguish different types of investments* and what rung each occupies on the “risk ladder.”
Investing can be a daunting prospect for beginners, with an enormous variety of possible assets to add to a portfolio.
The investment “risk ladder” identifies asset classes based on their relative riskiness, with cash being the most stable and alternative investments* often being the most volatile.
Sticking with index funds or exchange traded funds that mirror the market is often the best path for a new investor.
Understanding the Investment* Risk Ladder
Here are the major asset classes, in ascending order of risk, on the investment* risk ladder.
- Mutual Funds
- Exchange Traded Funds (ETFs)
- Alternative Investments* (Real Estate, Hedge funds and Private Equity funds and Commodities