Become A Member

In the realm of investments, understanding the balance between risk and return is crucial. This article discusses how investors, especially those without in-depth expertise, can use ballpark indicators to gauge investment risk and expected returns without needing exhaustive analysis. Risk and return are inherently linked; higher risk generally demands higher returns to justify the potential for greater losses. Historical performance serves as a guide for future expectations, though future outcomes remain uncertain. The article illustrates this concept with examples from various investment types: bank deposits, bonds, and more speculative products like structured credit and venture debt. It emphasizes that while bank deposits and high-rated bonds offer lower returns with correspondingly lower risk, riskier investments such as those offered by smaller banks or mid-tier firms present higher returns but also increased risk. Equity investments lack maturity and depend on market movements, with indices like Nifty and Sensex providing a benchmark for historical performance. Gold, though not productive, historically performs well during global uncertainties. The article also warns against investments promising guaranteed returns, which may indicate a Ponzi scheme or lack of transparency. Ultimately, the use of historical data and understanding risk tolerance helps investors make informed decisions.

KEYWORDS: Bonds, Equity, Gold, Risk, Returns