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Every month we hear promotional talk encouraging us to invest our time, effort, wealth, etc. We all
know the reason why people invest to invest. Even non-business people understand the concept of
investment, you give to have more. Investments grow by earning dividends, interests, profits, or gains.
Too often we forget that investing involves risks. You might experience losses instead of gains, or we
might never gain back what we invested.
This morning I was to share to you the concept of RISK and RETURNS in investment.
Illustration:
Pretty much when you invest P100,000 now in stocks, bonds, Treasury bills, or whatever form of
investment for a year are expecting to receive less than or the same amount? Of course no! You want to
have more!(Returns) But you are not to forget the possibility that you might be receiving less than or
worst nothing at all. (Risks)
What is the relationship of risk and reward in investment?
Generally, the higher the potential return of an investment, the higher the risk.
For Example:
Treasury bills, notes, and bonds are fixed-income investments issued by the Department of the Treasury.
They are the safest investments in the world since the government guarantees them. This low risk
means they have the lowest interest rates of any fixed-income security.
Safest in the sense that Government will always have money to pay.
But the disadvantage is it pays low interests compared to other investments.
Treasury Bills issued by Bureau of the Treasury Interest rates updated January 2020
91 days- 3.299%
182 days- 3.554%
363 days- 3.860%
Other Example:
KAPA an investment scheme that offers 40% interest every month. The risk is high and the reward is
high.
I’m not against KAPA nor pro. So sorry if this is the best example I have in mind to illustrate the risks and
returns in investment.
But my point is, be careful where you invest your time, money, effort, love, etc. because there are risks
attached to it. A good investor must first weigh and as much as possible choose an investment that gives
reasonable/high returns with minimal/tolerable risks.
In this life there are only two investment companies we can choose from. God’s Company, offers no
risks but highest returns.
Today, let’s invest our lives to God’s Company. Where there is no risk but yields the highest return. Be a
wise investor!