Investments
How to Invest in a Low Interest Rate Environment?
A refrigerator is a device to keep food fresh, but it cannot do so forever. Over time food inside the fridge becomes stale or dry and inedible.
Similarly, a bank is a place to keep your money safe, but then the money you save in a bank loses value over time because it cannot keep up with inflation.
Investing is the only known antidote to inflation. It also helps you grow wealth or generate passive income.
But investing can be volatile and risky.
Risk is the likelihood of losing money and not having the opportunity to recover it.
It typically happens due to unexpected reasons or bad investment decisions. (CFD/Margin Trading, Ponzi Schemes, Bankruptcy, geo-political events/sanctions, Government actions, etc.)
Volatility is the fluctuation in the market price of an asset. The values go up during favorable conditions, and they go down during adverse conditions.
Risk and volatility are inherent in investing and cannot be avoided altogether.
Investors must make decisions based on the risk/reward tradeoff.
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Risk and returns go hand in hand. Your potential to generate higher returns typically increases with your ability to tolerate higher risk.
The mental bargain you make with risk to generate desired returns is known as the Risk-return tradeoff.
You can achieve an ideal risk-reward ratio by using the following strategies;
We will learn more about these strategies in the following days.
See you tomorrow.
Author, Blogger & Independent Financial Advisor. My goal is to give you actionable tools for creating passive income and building wealth. More than 10,000 expats have already used my ideas to jumpstart their journey towards financial independence. Connect with me to start yours...
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