What is a no-brainer investment?

“It was a no-brainer: higher risk equals higher return. What junk bond investors had forgotten is that higher risk does not guarantee higher returns; it merely offers the chance of higher returns. When they closed their books on the eighties, they discovered that they had lost the gamble. Ovewr the course of the decade, money invested in the average junk bond grew just 145 percent – substantially less than the 177 percent investors would have earned in US Treasuries, without taking any credit risk whatsoever.”

Whenever someone says an investment is a “no-brainer”, one is indicating that you don’t need any brains to figure out that there is money to be made.

However, in real life, majority of such no-brainer investments turn out to be no-brainers in another way: You do not need any brains to understand the high risk involved.

Be careful. Losing an opportunity is far better than losing your capital.

#RidingTheRollerCoaster

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