Which of the following is considered a high-risk investment?

The selection of stock in a start-up company as a high-risk investment is correct due to several inherent characteristics associated with start-ups. These businesses typically operate in uncertain environments with unproven business models, which increases the likelihood of failure. Unlike well-established companies that have a track record of performance and financial stability, start-ups often lack historical data, making it challenging to predict their future success.

Moreover, investments in start-ups can be subject to significant volatility. They may experience rapid price changes based on market perception, developments within the company, or broader economic conditions. The potential for high returns is often accompanied by the risk of losing the entire investment, as many start-ups do not survive beyond their initial years.

In contrast, other listed options like real estate investment trusts (REITs) and index funds are generally considered less risky due to their diversified nature and historical performance. Government bonds are typically viewed as low-risk investments as they are backed by the credit of the government. Therefore, stock in a start-up company clearly stands out as a high-risk investment choice, aligning with the characteristics defining high risk in investment contexts.