Definition of "Investment Pyramid"

A model that is commonly used in financial planning to show the relationships among various types of financial service products and how they can be used to develop financial security. The foundation of the pyramid is built to provide financial security and includes such items as basic life, health and disability insurance, a cash reserve and very safe investments such as money market funds and Treasury Bills. Without a strong base the entire pyramid could be undermined by an uninsured illness, disability or unexpected death. As you move up the pyramid, the type of investments can become more growth oriented, with a longer time frame and the level of risk can be increased. At the top of the pyramid, the smallest area, is for speculative investments such as options, limited partnerships or commodities.