By John Sage Melbourne
False impression No 1: the higher the return the higher the risk
The concept that the higher the return the higher the risk is usually a fallacy.
The policy is: “There is not necessarily any kind of connection between risk and return and there might be!”
In other words,it is rather feasible to enter an investment that supplies a very reduced price of return,and has long shot of high return whatsoever,which also takes place to provide a very high level or riskIt is also equally feasible to discover an excellent investment with a high likelihood to supplying an superior return that does not offer a severe risk to capital.
Numerous commentators have claimed for so long that “the higher the risk the higher the return” that it is just taken as an axiom when there is potentially little or no real to this assertion in a wonderful lots of circumstances.
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False impression no 2: Spread your financial investments/ lower your risk
There is another associated false impression,that an sufficient technique to counter risk is to just “spread your risk”. An additional way of claiming this is “do not put all your eggs in one basket”. This has actually been duplicated many times that it is seldom if ever examined.
However it is equally feasible to put your mutual fund in various different financial investments all of which choke up for extended periods of time. Many capitalists have find this is most definitely the situation with the modern-day funds management sector,with high yearly costs and most fund managers just each attempting to match the sector index.
Spreading your financial investments does not necessarily cause a decrease of risk.
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