Financial Investment

Return

Risk

Liquidity

Checking account

Very low

Very little

Very high

Savings account

Low

Very little

High

Certificate of deposit

Low to medium Very little

Medium

Stocks

Bonds

High

Medium to high Medium

Medium

Low to medium Medium

Mutual funds

Medium to high Medium to high Medium to high

Housing

Medium

Medium

Low

TABLE 17.3 Key Characteristics of Financial Investments
424 17 • Financial Markets

Financial Investment

Return

Risk

Liquidity

Gold

Medium

High

Collectibles

Low to medium High

Low

Low

TABLE 17.3 Key Characteristics of Financial Investments

The household investment choices listed here display a tradeoff between the expected return and the degree of

risk involved. Bank accounts have very low risk and very low returns; bonds have higher risk but higher

returns; and stocks are riskiest of all but have the potential for still higher returns. In effect, the higher average
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