Sorry, in investing, there is no such thing as a free lunch.
That means there is no such thing as a low risk, high return investment.
Simply put, for the capital markets to function properly, every increase in expected return must be accompanied by a commensurate increase in risk. End of story.
So when someone tells you about a “sure thing” investment, your “No Free Lunch” alarm should sound. You can avoid some of the most expensive investment mistakes by remembering to listen to that alarm when it sounds.
Most investors know intuitively that risk and reward are related. However, knowing that fact and resisting the temptation to act on an investment tip that promises high returns with low risk can be irresistible for many investorsâ€¦often at the expense of their capital.