Investment Pyramid

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DEFINITION of 'Investment Pyramid'

A portfolio strategy that allocates assets according to the relative safety and soundness of investments. The bottom of the pyramid is comprised of low-risk investments, the mid-portion is composed of growth investments and the top is speculative investments.

BREAKING DOWN 'Investment Pyramid'

The base (the widest part of the pyramid) would contain government bonds and money market securities, stocks would make up the middle of pyramid and then the top would be options and futures. Thus, the higher you go up the pyramid, the greater the risk and the potential return.

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RELATED FAQS
  1. What is a risk pyramid and why is it important?

    A risk pyramid, also known as an investment pyramid, is a strategy an investor uses to determine how to invest his money. ... Read Full Answer >>
  2. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

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