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There is no asset without risk. If you hold bonds, you are long fiat. Which can be devalued on a whim. Avoiding single-stock risk is simple. You buy another st
by ArtTimeInvestor 2y ago
There is no asset without risk. If you hold bonds, you are long fiat. Which can be devalued on a whim.
Avoiding single-stock risk is simple. You buy another stock.
- JumpCrisscross 2y ago> no asset without risk That doesn't follow in any way from the concept of a risk premium [1]. [1] https://en.wikipedia.org/wiki/Risk_premium https://en.wikipedia.org/wiki/Risk_premium
- ArtTimeInvestor 2y agoExactly. The "risk free rate" does not exist when it comes to the purchasing power of an asset. And the purchasing power is what matters to an investor. The 4% bonds pay you might be somewhat "risk-free" when it comes to "getting your investment back and 4% on top of it". But it is likely to have been devalued. And often to a large extend.
- JumpCrisscross 2y agoThis is not what equity risk premium means. (You also seem to be misunderstanding the role of a risk-free rate, which is commonly understood to not mean with absolutely zero risk whatsoever.) A good introductory finance text is Fabozzi’s Fixed Income.
- ArtTimeInvestor 2y agoIf you have a point, state it. Just claiming "You are wrong, educated yourself" won't get us anywhere. I think that you are wrong just like you think I am wrong. But I am willing to discuss it.