Julian: Julian wants to make money quickly. He prioritizes the riskiest investments with the highest potential returns. To provide income in the short term, an asset needs to be able to grow in value quickly. Julian opens a mutual fund account and begins researching high-performing stocks and high-yield bonds. These have high rates of return, but they have higher risk as well.

 

Marc: Marc wants to slowly and steadily build savings. He prioritizes the least risky investments, but still with an eye toward the return on investment. Savings and retirement accounts build wealth slowly over time, with low rates of return. Marc opens an IRA to save for his retirement and buys a six-month certificate of deposit.

 

The following steps:

 

1. Evaluate Risk and Reward: Evaluate Julian and Marc's potential investments for risk and reward.

Marc and Julian are considering the following investments for their portfolio. Help them evaluate each one by weighing the risk versus return. Rank each as low, moderate, or high in each category.

 

Investment	Potential Return	Potential Risk
Money market savings account
IRA
Stock in a new tech company
Mutual fund
Five-year CD (2% interest)
High-yield five-year bond