The answer to this question depends on an investor’s personal risk appetite and financial goals. Generally speaking, a portfolio made up of 40% mutual funds, 40% Treasury bonds, and 10% stocks would be considered the highest risk portfolio. This is because the portfolio has an equal distribution of both equity and fixed-income investments.
Equity-based Investments
Equity-based investments are higher-risk securities because their value can rise or fall unexpectedly. Mutual funds are one type of equity-based investment that is considered to be riskier than other types of investments. Mutual funds are typically composed of a diversified portfolio of stocks and can be quite volatile. Investing in stocks directly is even more risky as stock prices can be affected by numerous factors. When constructing a portfolio, it is important to be aware of the risks associated with equity-based investments.
Bond-based Investments
Bond-based investments are generally considered to be lower-risk than equity-based investments. Treasury bonds are one type of bond-based investment that are backed by the full faith and credit of the U.S. government. When the federal government issues a bond, it agrees to pay a specific amount of interest for a set number of years. This type of bond is generally considered to be low-risk, since the federal government is unlikely to default.
Certificates of deposit (CDs) are another type of fixed income security. They are issued by banks and other financial institutions and are typically low-risk investments. They offer a fixed rate of return, usually over a period of one to five years, and limits the risk of the investor’s principal investment.
Conclusion
In conclusion, a portfolio made up of 40% mutual funds, 40% Treasury bonds, and 10% stocks is considered to be the highest risk portfolio. However, this portfolio is still considered to be relatively low-risk, since it includes a mix of both equity and fixed-income investments. Investing in such a portfolio can help to diversify an investor’s risk and potentially earn higher returns. Additionally, with careful selection of investments, the risk associated with this portfolio can be further reduced.