Welcome to the new morningstar.hk! Learn more about the changes and how our new features help your investing success.

What You Need to Know to Invest

Understanding risk and how it relates to three different ways to grow your money is key.

Sarah Newcomb 24 December, 2019 | 10:12

Why invest? Because every year, things cost more and more and more, which is why it’s so hard to keep pace with the cost of living if you’re relying on savings alone to build your nest egg. What cost $1,000 20 years ago costs more than $2,000 now, and in a couple dozen years, it will be double that. As a friend recently observed, “I remember when a truck cost $10,000. Now that’s the discount they advertise in promotions.”

Inflation may be better than deflation, but it’s still a pain in the neck. The tiny amounts of interest you can earn from savings accounts aren’t enough to keep up, so as weird as it sounds, saving your money is a guaranteed loss. If you want to grow your savings, you’ve got to invest it, and that means facing some hard trade-offs between risk and return.

The Booby Trap
You’ll hear a lot of people cite the rule-of-thumb “More risk; more return,” which is a simplistic misunderstanding of the risk-return relationship--and a dangerous mental booby trap. If higher risk always meant a higher return, then it wouldn’t actually be risk!

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free

About Author

Sarah Newcomb

Sarah Newcomb  Sarah Newcomb is a behavioral economist with Morningstar.

Audience Confirmation


By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.
© Copyright 2020 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies