Aggressive instruments are those primarily invested in for growth. As the chart shows, they include things such as common stocks, stock mutual funds, commodities, Business Development Companies (BDCs), and speculative real estate. Again, these are typically invested in growth or capital appreciation, not income. They are considered aggressive because, while they can provide large short-term gains, they can also carry a higher risk of sudden losses.

On the left of the chart are investments that are considered conservative because, in theory, they are deemed to have no default risk. These include bank CDs, government bonds, fixed annuities, and insured municipal bonds.

In the middle of the chart are moderate instruments that have some default risk but are generally considered to have a much lower risk of loss than aggressive investments. These moderate options include corporate bonds, indexed annuities, preferred stock, and Real Estate Investment Trusts (REITs).

To continue reading, sign up!