Question

Rank the following fund categories from most risky to least risky: I. Equity growth fund II. Balanced fund JII. Sector fund IV. Money market fund Multiple Choice IV, I, III, I IlII, II, IV,I I, II, III, IV III, I, II, IV

Answer 1

Answer is option 4 -

3, 1, 2, 4

Sector Funds, Equity Growth Fund, Balanced Fund and Money Market Funds.

Sector Funds are most risky in nature as this fund is not diversified and put entire exposure in one sector. This carries sector specific risk.

Equity Growth Funds put money in emerging companies to get maximum capital appreciation. As these companies are emerging so risk of failure is always there however being diversified this eliminate the sector specific risk.

Balanced Fund - Such funds put money in equity and debts (Bonds and TBills) both.

Money Market Funds - These funds are very liquid and invest in short-term debt securities like Treasury bills and Commercial Paper.