The concept of “taking low risk & getting high return” is possible or not? What do you think? Share your opinions…
Sounds counter intuitive to me
Risk and reward are two sides of the same coin, they move in similar proportions. Higher the risk, higher is the expected reward and vice verse.
But anyway, did you have a strategy in mind when you mentioned this?
Yes. Discovered after long time of research & hard work.
@Karthik You may be, glad to know that I’m your big fan. Guess… why?
Higher rewards by taking lower risks sounds really good but Risk and Reward go hand in hand, Higher the risk, higher the returns can be and lower the risk, lower the returns.
Do situations with high risk and very low return exist?
Situations with Low risk and High rewards exist!!!
The major mistake that many “whos who” of stock market make is they consider this is binomial equation.
The phrase RR also boosts this misconception.
Its actually a 3-variable equation.
- Guess the 3rd one
@Karthik Sir, any guess!!
It’s not only about risk-reward
Probability also plays major role.
Buying deep OTM for 2/- on expiry day and if nifty moves 1000 points, one can make unlimited money on literally no risk.
But is nifty moving 1000 points in a day possible?
No idea sir, but must be something related to Varsity
Risk and Reward in the backdrop of time?
Time is very very important factor which most of us ignore.
As @Default pointed here probability of profit can be considered as the 3rd variable.
But again as you know, PoP is a derivative of time. ( Infinite DTE will make PoP of any strategy 100%)
So yes if we want to consider various matrices of strategies then Time should be considered along with R:R.
Its my humble opinion. Please do correct me or add inputs to enrich our knowledge.
Of course. There is not point in getting a 100% return against a 20% risk, but the waiting time was 15 years for the same
Yes, you guessed right. I’m really impressed by your writing style.
Yes. Time is money.