July-August 2016 – Q: Where can I earn interest on my money without risking loss in our uncertain economy?
A: Risk and return are always connected. Here’s a good description of that from investopedia.com:
The risk-return tradeoff is the principle that potential return rises with an increase in risk. … invested money can render higher profits only if it is subject to the possibility of being lost.
I suggest that if you are ready to take that risk, be patient. Wait just a little longer – possibly until the end of the summer – until we start to see how the politics in America and around the world begin to play out. Then, there will be plenty of opportunity to get a bit of return to supplement your income in the future. But, for now, don’t grow impatient because of some of the “good news” you are hearing. Instead be patient, understanding that this good news may be very temporary.
Dan Celia has been in financial management for more than 30 years. He works closely with AFA Foundation and can be heard six days a week on AFR Talk (afr.net).
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