Sunday, June 18, 2006

Investment lessons in a single picture

Demonstrated to me by my banker friend Manmohan, at my new company. Fairly self explanatory.

Summarized as follows,
  • The chance of higher earnings/profit increases with more riskier investments.
  • The moment a person gets better earnings from an investment destination, the risk in investing w.r.t that destination virtually reduces, and it is wise to put in/ transfer more investments to that destination.
  • The bulk of investments should be in the least risky of all investment destinations.
  • It is generally better to put money in an investment destination where the principal amount is guaranteed to be returned. Direct equities and mutual funds are therefore not recomended as good investment destinations unless well understood.
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