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The Wise Investor

also used to mean 'high volatility, high return'. This is a
critical distinction.
An investment can be volatile, and still be very safe and
low risk in the long term.
Investors hate uncertainty and instability, and so they
demand a higher profit from volatile investments. In the
same way as safety, a sensible person would always choose
a stable investment over a volatile one if everything else
were equal.
The laws of supply and demand ensure that volatile
investments may provide a higher profit in the long term than
stable investments. This means that people who are
investing for the long term should choose safe but volatile
investments, such as quality shares and quality properties, to
gain the highest and most reliable profit over a long period of
Now, the third issue. On the surface, this saying implies
that the investor is trapped. They can choose a safe
investment, but this will lead to a low return. They can
choose several risky investments, and these will each
produce a higher profit, but since they are risky, the investor
will loose money on some of them, and in total they are left
with a low average profit for the whole portfolio.
It seems like a no-win situation. However, in reality the
situation is very different. The missing link, the factor that
this saying does not include, is the quality of the individual
Take a trust or a company as an example. If the
management is poor, the returns may be very low, and the
investment is also very risky, as it may fail altogether. In this
case we have a 'high risk, LOW return' investment.
Take the other case, where the management is excellent,
and the people managing the investment are doing all the
right things.
In this case, we will have a high return, but a low risk, as
the investment will be very strong and have a secure future.
Overall then, we come to the following conclusion. The