Which type of asset allocation might increase an investor's exposure to risk?

Investing mainly in stocks increases an investor's exposure to risk because stocks are generally more volatile than other asset classes such as bonds or cash. The stock market can experience significant fluctuations in value over short periods, influenced by various factors including market conditions, economic indicators, and company performance.

By choosing to allocate a significant portion of their investment portfolio to stocks, an investor is likely to experience greater potential for both returns and losses compared to a more conservative approach that involves bonds or fixed-income securities. Stocks can provide higher long-term growth potential, but this comes with the trade-off of increased risk, especially if the investor does not have a diversified portfolio to buffer against market downturns.

In contrast, diversifying into bonds or holding a mixture of cash and bonds would typically lower an investor's exposure to risk, as these assets tend to provide more stability and income. Fixed-income securities also tend to be less volatile than stocks, offering lower risk and more predictable returns. Thus, a predominantly stock-focused investment strategy represents a more aggressive risk profile.