High Returns with Low Risk!

I am often asked where they should invest their assets for optimal returns with minimal risk (of course!).

“Low risk, high returns!” has an attractive sound to it, doesn’t it?

Kinda like “Get rich quick!” or “Free beer!”?

Risk and returns have an inextricable link. When risk increases, so does the potential for higher average returns – with more volatility and the possibility for big declines along the way. This explains why stocks have historically provided investors with such great returns over time – an element of risk is often necessary for healthy returns; that’s why Vanguard lists its risk/reward rating on each fund (with lesser risk/reward and greater risk/reward pairings):

However, too much risk can lead to substantial losses, which is precisely why it is wise not to rely on common stock screeners and sort or filter stocks with high dividend yields alone. There’s usually an explanation why those yields are so attractive (e.g. a company is facing significant strategic threats, revenues are declining rapidly and there is legitimate worry they may reduce or discontinue the dividend).