A risk structure that spreads investor's risks across low-, medium-, and high-risk vehicles. The bulk of the assets are in safe, low-risk investments that provide a predictable return (base of the pyramid). At the top of the pyramid are a few high-risk ventures that have a modest chance of success.
This is a risk structure that many investors aim for in spreading their investments between low-, medium-, and high-risk vehicles. In a financial pyramid, the largest part of the investor's assets is in safe, liquid investments that provide a decent return. Next, some money is invested in stocks and bonds that provide good income and the possibility for long-term growth of capital, and so on.
Many investors structure their portfolios in the form of a financial pyramid. The base of the pyramid is made up of nonvolatile, liquid assets. The next level includes securities that provide both income and long-term capital growth. At the third level, a smaller portion of the portfolio is allocated to more volatile investments with higher potential returns and greater risk. And at the top level, the smallest percentage of the overall portfolio is invested in ventures that have the highest potential return but also pose the greatest investment risk. This strategic approach gives you the potential to realize significant returns if some of your speculative investments succeed without risking more than you can afford to lose. It's entirely different from a pyramid scheme, a scam that uses new investor money to pay large returns and repayment, to earlier investors.
An investment plan in the shape of a pyramid structure where the safest investments are at the base and the riskiest investments at the peak.
An investment strategy which apportions an investor's assets based on four categories of risk. The largest portion of assets are invested in safe, liquid investments. The second largest portion of assets is allotted to low-risk investments with the objectives of income and long-term growth. Third are assets categorized as medium-risk, and fourth, the smallest portion of assets, is comprised of high-risk investments. See: Liquidity; Risk
Many investors allocate their investments in what's described as a pyramid structure. A typical financial pyramid has four levels: The majority of assets are in safe, liquid investments that form the base of the pyramid. The next level is composed of securities that provide both income and longer-term capital growth. At the third level, a smaller portion of resources is invested in more speculative investments with higher potential returns. And the top level, containing the smallest percentage of the overall portfolio, is invested in ventures that have the highest potential return but also the greatest investment risk. Using a financial pyramid to distribute your investments allows you to balance need for stability with your desire for a higher return.