The following chart shows a comparison of the volatility of the US stock and bond markets, note that the swing of the stock market is much larger than the swing of the bond market, this shows that stock market investing is riskier than bonds using volatility as a measure
The returns for the same period shows that stock market returns are almost double that of bonds
ergo high risk=high returns, low risk=low returns
Now close your eyes and try to imagine how the volatility of a time deposit would look like, flat? how much is the return?
less risk less return..
ReplyDeletemore risk more potential return.
The amount of reward is proportional to the risk we take