Investment Pyramid

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. 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 ...
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 difference between derivatives and options?

    Options are one category of derivatives. Other types of derivatives include futures contracts, swaps and forward contracts. ... Read Full Answer >>
  3. How are rights distributed in a rights offering?

    In a rights offering, rights are distributed to shareholders based on the number of shares they already own. What Is a Rights ... Read Full Answer >>
  4. What are the main risks to the economy of a country that has implemented a policy ...

    The main risk to the economy of a country that has implemented a policy of austerity is the potential for a self-reinforcing, ... Read Full Answer >>
  5. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>
  6. What happens if a software glitch fails to execute the strike price I set?

    If you've ever suffered the frustrating experience of having an order not filled or had a strike price fail to execute because ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Determining Risk And The Risk Pyramid

    Many investors do not understand how to determine the risk level their individual portfolios should bear.
  2. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  3. Investing Basics

    Introduction To Multi-Discipline Accounts

    You get multiple managers, affordable diversification, customization and consolidated reporting all under one roof.
  4. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  5. Mutual Funds & ETFs

    The Quest To Build A Unified Managed Account

    Find out why the convenient, customizable UMA should be the next big thing in managed money.
  6. Options & Futures

    Interpreting Overnight Action In The Index Futures

    Overnight action in index futures sets the tone for the U.S. market day. Traders can use 24-hour index futures charts to predict action in the coming day.
  7. Professionals

    Are You Sure You Aren't Ponzi Scheme-Susceptible?

    Anyone can be a victim of a Ponzi scheme — even the most financially literate. Here's how to avoid the next Madoff.
  8. Options & Futures

    Stock Options To Trade On Intraday Momentum Index

    The intraday momentum index, or the IMI, can offer a reliable way to profit on options, but only for the right stocks.
  9. Options & Futures

    Intro to NYSE Binary Return Derivatives

    The New York Stock Exchange is entering into binary options trading. Here’s a quick introduction to how NYSE Binary Return Derivatives (ByRDs) work.
  10. Professionals

    7 Cybersecurity Tips for Advisors

    The digital age has created a new breed of thief who can break into client files at any time, but there are ways to minimize risk exposure.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!