The Risk Spectrum

Back to risk. For previous posts on risk, click here.

As I mentioned in previous posts, you can take on lower risk, but also at mainly lower rewards or returns. An newsletter from the Lord Abbett mutual funds broke risk down into various categories. Low risk/reward investments are considered "crawling", investments with a little more risk are considered "walking", and investments with even more risk are considered "running".

Here are some examples:

Crawling

• Tax exempt bond funds that invest in short-to-mid-range maturity municipal debt.
• Short-term corporate bonds.

Walking

• Intermediate-range corporate bonds.
• High-yield corporate debt.
• Convertible securities.

Running

• Equities (stocks).

Within this last category, the risk spectrum can be defined further from lower to higher by looking at large and well-established stocks, then mid cap value stocks, then small cap stocks.

As always, each person's definition of risk will differ, as well as how much risk each person is willing to endure will differ. Seek the help of a financial advisor or professional to learn more.