I have strong reservations how someone could say investors could shift to emerging market equities and real estate at “no additional risk.” I think that the recent collapse of the housing and equities markets show how risky they truly are. Rather, companies should reshape their expectations on investment returns. Certain investments, such as real estate, have had inflated returns for too long. Likewise, investments in precious metals or other commodities will fail if the currency to which they are valued collapses.
If I want a secure investment today, I have to realize the returns will be quite low. If I want higher returns, say by investing in Irish or Greek government bonds, my risk exposure will increase. If those returns aren’t enough, I could invest in a start-up in Asia but risk that the company would go belly up. If that’s not enough, I could buy up some new houses in California and pray for a market rebound. Of course, if I want exceptionally high returns with high relative risk, I could just take my money to Las Vegas.
I have strong reservations how someone could say investors could shift to emerging market equities and real estate at “no additional risk.” I think that the recent collapse of the housing and equities markets show how risky they truly are. Rather, companies should reshape their expectations on investment returns. Certain investments, such as real estate, have had inflated returns for too long. Likewise, investments in precious metals or other commodities will fail if the currency to which they are valued collapses.
If I want a secure investment today, I have to realize the returns will be quite low. If I want higher returns, say by investing in Irish or Greek government bonds, my risk exposure will increase. If those returns aren’t enough, I could invest in a start-up in Asia but risk that the company would go belly up. If that’s not enough, I could buy up some new houses in California and pray for a market rebound. Of course, if I want exceptionally high returns with high relative risk, I could just take my money to Las Vegas.