Friday, November 26, 2021

9. NO FREE LUNCH - Low risk; low returns, High risk; high returns



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?


1 comment:

  1. less risk less return..
    more risk more potential return.
    The amount of reward is proportional to the risk we take

    ReplyDelete