What is an example of a moderate-risk investment?

Bonds are considered a moderate-risk investment because they typically offer a balance between potential return and risk. When you purchase bonds, you are lending money to a government or corporation in exchange for periodic interest payments and return of the bond's face value upon maturity. While there is some risk of default, particularly with corporate bonds, government bonds are generally viewed as safer.

The reason bonds fit into the moderate-risk category lies in their characteristics compared to other investment vehicles. They generally yield higher returns than savings accounts and money market accounts, which are low-risk, low-return options. However, they do present more risk than an IRA or a traditional savings account, where the principal is often guaranteed and interest is typically lower.

In investment strategy, bonds can serve as a stabilizing element in a portfolio, providing steady income while also having the potential for appreciation in value based on interest rate movements and other market factors. This balanced risk profile is what classifies them firmly within the moderate-risk investment category.