Which types of investments are typically considered high risk?

Investments that are classified as high risk usually have greater potential for significant fluctuation in value, which can lead to higher potential returns but also a greater chance of loss. Stocks, particularly those of smaller or less established companies, can experience considerable volatility based on market conditions, company performance, and overall economic factors. Cryptocurrencies, known for their extreme and unpredictable price movements, embody an even higher level of risk due to their nascent market stage, regulatory uncertainties, and speculative nature.

In contrast, options such as bonds, real estate, mutual funds, ETFs, government securities, and index funds are generally seen as lower risk. Bonds usually provide fixed income and are considered safer, particularly government bonds. Real estate can offer steady returns, albeit with some risk, especially in fluctuating markets. Mutual funds and ETFs are designed to spread risk across a diversified portfolio, and government securities are backed by the government's promise to pay, making them very secure investments. Index funds, which track a market index, also offer diversification but with lower risk compared to individual stocks or cryptocurrencies due to their broader exposure to the market.

Therefore, stocks and cryptocurrencies are correctly identified as high-risk investments due to their volatility and the potential for rapid changes in value.