Traditional textbook thinking is that equities have the highest level of risk (which comes with high reward sometimes), bonds moderate level of risk (wihich comes with moderate reward) and CASH is KING (as such its return is very low often negative interest because return is lower than inflation).

Traditional thinking:  Equities (high risk),  Bonds (moderate risk),  Cash is King (no risk).

Is this true? Traditional thinking is just too traditional. In modern era, this is not true. Cash is merely like another bond. Because cash is part of a bank's book, any of the amount that is not guarantee by the local government is at risk not much too different from a bond's default risk. These days, crediting rating for a bond and for a bank cannot be trusted. Perhaps partly due to risk that cannot be capture fast enough or perhaps due to conflict of interest, credit rating seems to give false impression with regard to the safety of an insitituion or a bond. Consider Kaupthing Singer & Friedlander which has collapsed on 9 Oct 2008. On 30th Sept 2008 (which slightly more than a week before), the bank was still rated by Moody to be A1 for long term and P-1 for short term. "A1" shows that it is an investment grade bank while P-1 is the highest credit rating with regard to the short term basis. Yet in just one week the bank collapses. With such a situation, depositors and investors cannot trust credit rating at all.

Another risk that credit rating cannot capture - not any other method for the matter - is the silient run on the bank. Due to technological advancement, it is now possible to transfer money with a click of a mouse. See  Online bank customers create damaging 'silent runs'