Which investment vehicle carries the least risk?
A. Government bonds
B. Large company stocks
C. Small company stocks
D. U.S. Treasury bills
My answer is C
To determine which investment vehicle carries the least risk, let's analyze the options provided.
A. Government bonds: Government bonds are considered to be relatively low-risk investments because they are backed by the government. They have a fixed interest rate and maturity date, making them less susceptible to market volatility. However, there is still some risk involved, such as inflation and interest rate fluctuations.
B. Large company stocks: Large company stocks are associated with lower risk compared to small company stocks because large companies tend to have more stable financials and established market positions. However, they are still subject to market volatility and economic conditions.
C. Small company stocks: Small company stocks generally carry a higher risk compared to large company stocks. These companies are often less established and more sensitive to economic downturns. They may also be subject to liquidity issues and have higher volatility.
D. U.S. Treasury bills (T-bills): U.S. Treasury bills are often considered to be one of the safest investment instruments. They are issued by the U.S. government and carry virtually no risk of default. They have short-term maturities (usually less than a year) and provide a low but relatively risk-free return.
Based on the information above, it can be concluded that the investment vehicle carrying the least risk is D. U.S. Treasury bills. These investments are backed by the U.S. government and have minimal default risk. However, it's important to note that they also provide lower returns compared to other investment options with higher risk profiles.
Keep in mind that investment decisions should be made based on individual financial goals, risk tolerance, and investment time horizons. Consulting with a financial advisor can provide personalized advice based on your specific circumstances.