ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A portfolio made up of 20% savings accounts, 50% mutual funds, and 30% bonds.
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A portfolio made up of 40% mutual funds, 40% bonds, and 10% stocks.
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A portfolio made up of 60% stocks, 30% mutual funds, and 10% bonds.
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A portfolio made up of 70% mutual funds, 10% stocks, and 20% bonds.
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Detailed explanation-1: -Because stocks have a much higher risk than mutual funds, savings accounts and bonds, which implies that the portfolio with the highest percentage of stocks is the most riskful.
Detailed explanation-2: -The level of risk in a mutual fund depends on what it invests in. Stocks are generally riskier than bonds, so an equity fund tends to be riskier than a fixed income fund. Plus some specialty mutual funds focus on certain kinds of investments, such as emerging markets, to try to earn a higher return.
Detailed explanation-3: -The highest risk investments are cryptocurrency, individual stocks, private companies, peer-to-peer lending, hedge funds and private equity funds. High-risk, volatile investments may bring high rewards, or they may bring high loss.
Detailed explanation-4: -Mutual funds are largely a safe investment, seen as being a good way for investors to diversify with minimal risk.