Investment Pyramid


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.

  1. Option

    A financial derivative that represents a contract sold by one ...
  2. Money Market

    A segment of the financial market in which financial instruments ...
  3. Speculative Company

    A company with a significant percentage of its assets tied up ...
  4. Futures

    A financial contract obligating the buyer to purchase an asset ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Growth Stock

    Shares in a company whose earnings are expected to grow at an ...
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  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. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  4. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  6. 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 >>

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