Risks And Returns - Part 2

Risks And Returns

Low Risk High Return

In the real investment world, there is no such thing as Low Risk High Return; otherwise investing becomes so simple. Even uncles and aunties also can become fund managers. 

During market crashes, the yield of some financial instruments at that moment are rising due to the perceived risks are increasing. 

Potential buyers are demanding high returns for taking perceived higher risks. When the perceived risk gets higher, the yield must get even higher; otherwise the market will never find willing buyers. However, there will be some brave early buyers who believe such higher risks are not real.

In the market, from time to time, there may be some isolated opportunities for low risk high return available to some better informed ones; but soon load of buyers will come and chase them back to low risk low return.

So generally speaking, there is no such thing as low risk high return. If you happen to know such low risk high return financial instrument available to you, then keep it to yourself; otherwise load of buyers will come after them.