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. Money Market

    A segment of the financial market in which financial instruments ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Speculative Company

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

    The chance that an investment's actual return will be different ...
  5. Futures

    A financial contract obligating the buyer to purchase an asset ...
  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. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

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