Investment Risk and Return Characteristics

The chart below provides some examples of common types of investments classified according to their potential return and investment risk. In no way does it purport to render specific investment advice. Consultation with an investment or financial planning professional can provide personalized suggestions for individual situations. Another source of basic investment information is the Cooperative Extension System Investing for Your Future home study course available online at www.investing.rutgers.edu.

Potential Return Investment Risk (Volatility) Examples of Common Investments
High High
  • Aggressive growth funds
  • Emerging markets mutual funds
  • Foreign company stocks
  • Global, international, sector, and precious metal mutual funds
  • Penny stocks
  • Small cap stocks and funds
  • Variable annuities invested in aggressive growth sub-accounts
Moderate Moderate
  • Convertible bonds
  • High-yield (junk) bond funds
  • Large-cap stocks and funds
  • S&P 500 & Wilshire 5000 stock index funds
  • Variable annuities invested in large-cap stock sub-accounts
Low Low
  • Fixed annuities
  • Government agency securities (e.g., Ginnie Maes)
  • High quality short- and intermediate-term municipal and corporate bonds and bond funds
  • Money market mutual funds
  • Treasury bills and notes
  • U.S. savings bonds (Series I and EE)
  • Variable annuities invested in high-quality bond sub-accounts
Very Low Very Low
  • Certificates of Deposit
  • Money market deposit accounts
  • NOW checking accounts
  • Passbook or statement savings accounts

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