Which of the following lists of investments is ordered correctly from the least risk to the most risk?

The correct order from least risk to most risk is indeed Certificate of Deposit, Mutual Fund, and Stock.

A Certificate of Deposit (CD) is considered very low risk as it is typically insured by the government and offers a guaranteed interest rate over a fixed term. This means that the principal amount is secure, and investors understand exactly how much they will earn.

Mutual Funds come next in terms of risk. They consist of a diversified portfolio of stocks and/or bonds, which spreads out risk; however, they still involve market risk. The value of mutual funds can fluctuate based on the performance of the assets they hold, so while they are generally less risky than individual stocks due to diversification, they carry more risk than a guaranteed investment like a CD.

Stocks represent the highest level of risk among the three. Investing in stocks means buying shares of individual companies, which can be subject to significant market fluctuations. A company’s performance can be influenced by various factors, including economic conditions, management decisions, and investor sentiment, leading to potential gains but also possibilities of losses.

This understanding of risk levels is fundamental in personal financial management, as investors need to align their investment choices with their risk tolerance and financial goals.