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Financial investment misconceptions– Part 1

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 generally a misconception.

The policy is: “There is not necessarily any kind of connection between risk and return and there may be!”

Simply put,it is fairly feasible to go into an financial investment that supplies a very reduced rate of return,and has little chance of high return whatsoever,which additionally occurs to offer a very high degree or riskIt is additionally just as feasible to locate an outstanding financial investment with a high likelihood to supplying an impressive return that does not give a significant risk to funding.

A lot of analysts have claimed for as long that “the higher the risk the higher the return” that it is simply taken as an axiom when there is possibly little or no real to this assertion in a fantastic many scenarios.

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False impression no 2: Spread your investments/ lower your risk

There is an additional relevant misunderstanding,that an appropriate method to counter risk is to simply “spread your risk”. Another means of stating this is “don’t place all your eggs in one basket”. This has been repeated so many times that it is seldom if ever questioned.

However it is just as feasible to place your mutual fund in numerous various investments every one of which choke up for long periods of time. Numerous investors have uncover this is most definitely the instance with the contemporary funds administration industry,with high yearly charges and a lot of fund managers simply each attempting to match the industry index.

Spreading your investments does not necessarily bring about a decrease of risk.

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