Can we reduce risk and increase returns by the use of Time?
On a one year basis, the investment option could have a return of between -30% & +60%.
The same investment option over 5 years could be between +6% & +10% pa.
What happened to the risk? It was reduced and the worst case was a 6% pa return and the best case was 10% pa return.
So what does that difference work out to over a lifetime, if we get 10% rather than 6%, contributing $10,000 pa?
- $14,000,000 rather than $5,000,000 or
- 10,000,000 rather than $5,000,000 or
- 8,000,000 rather than $5,000,000
Hint: the Answer is #1 – $14 million dollars.